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[applause]

[applause] >> ladies and gentlemen, and the president and vice president of the united states. [cheerse and applause] thank you all. >> [cheering "yes, we can"] >> yes, he did. thank you all for being here today. please, the seat of.

-- be seated. ladies and gentlemen, to state the obvious, this is a historic day. -- this is the beginner and it this stroke of a pen. it begins when they decide there is a greater risk in accepting the situation we cannot bear it than instilling our change. that is when -- history is made when a leaders passion is matched with his principal in service of this country. mr. president, your passion to make the lives of ordinary american specter has been on display. the principles that guide your service have led this nation to this moment. mr. president, 30 minutes ago,

by the stroke of your pen, we began the process of making life better for tens of millions of americans and for evermore. [applause] >> for much too long, americans have been entitled to decent, affordable health care. you succeeded, mr. president. and we owe you for that.

as i said, i quoted virgil, the classic greek poet who once said "the greatest wealth is help. -- health." you have made is a nobler and book your nation. ladies and gentlemen, the president of the united states of america barack obama. [applause] thank you, everybody. thank you. thank you. please, have a seat. we wanted to do this twice because they are so many people we have to think.

as a look around the room, we have leaders of labor who helped to make this happen. we have ordinary folks who knocked on doors, make phone calls at the last minute to get this thing over the top. mike sterner members of my cabinet who have additional members of congress who helped lead the charge on this. my staff vice here still here. i thought there going to quit at any given moment. they just suck it out with me. the main purpose here is to say thank you. thank you on behalf of the american people after a historic vote, health care reform is no longer an unmet promises. it is the law of the land.

2 >> although it may be my signature at the bottom of this bill, it with your work, your commitment, your unyielding hope that made this a victory possible prad. when they deployed an onslaught of negative ads to preserve the status quo, you did not give up. you took to the street. you mobilized. you organize. you turned up the pressure. you kept it the fight. when they were obsessing over who was up into was down, you never lost sight of what was right and what was wrong.

he knew this is not about the fortunes. this is about the future of our country. 2 when the opposition said this is not the right time, you did not want to wait another year or in a decade or another generation for reform. he felt the urgency of now. you met the lies with truth. he met psittacism -- you that cynicism with the truth. that his faith in america. he met with coke. -- you met it with hope. despite the smallness of what passes for politics these days,

despite those he said progress was impossible, you may people believe, people who love this country that change was possible. this victory is not mine. it is your victory. it is a victory for the united states of america. [applause] for two years on the campaign trail, and for the past year as yet we have work to fix the health issues, folks like you have propelled this movement and kept us, of what was at stake. where the has a day gone by that not heard from someone personally whether any letter or e-mail or town hall who has reminded me of why it was so important that not give up. remind me why we could not quit. i heard from brian smith who runs a small business with five

employees. he is trying to do the right thing. he is paying for half of the cost of coverage. as premiums keep going up and up, he is gonna have to start offering health care for his people. because of this bill, he is now going to be getting tax credits that allow him to do what he knows is the right thing. that is going to be true for millions of employers all across america. [applause] i heard the story of a 11-year old marcela owens who is right here. he is looking sharp. he and i made sure to coordinate our ties. it looks good.

[laughter] he is a wonderful young man. he lost his mom to an illness. she did not have insurance. she cannot afford the care she needed. in her memory, marcelas has told her story across america so that no other children has to go through what his family has experienced. that is why we do not quit. i heard from folks who had to give up her health coverage after rates were it jacked up by almost 40%. she is terrified that an illness would mean to with this the house that your parents built, but she also knew that if she

burdened by a these huge premiums that you not be able to pay the mortgage. she decided not to keep her health insurance. she is now lying in her hospital bed as we speak face was such an illness. she is praying that she could somehow afford to get one. her sister connie is here today. it is because of natoma's family that we could not quit. i have met people like ashley who worked for my campaign. where is she? there she is right in front. ashley decided to get involved with our campaign a couple of years ago because her own mother lost her job and with the help

insurance. they had to file bankruptcy. ashley work tirelessly not to get me elected but to solve a problem. each of these americans made their voices heard. it is because of them and so many others and so many of you that real meaningful change is coming to the united states of america. it is because of you that we did not quit. it is because a few that congress did not quit. it is because if you that i did not quit. it is because of you.

[applause] now, let me tell you what changel ooks like. those fighting change are still out there, still making a lot of noise about what this reform means. i want the american people to understnadand it -- go and look at what reform will mean for you. [laughter] i said this once or twice, but

it bears repeating -- if you like your current insurance, and you will keep your current insurance. no government takeover. no one is changing what you got if you are happy with it. if you like your doctor, you will be able to keep your doctor. in fact, more people will keep their doctor because the coverage will be more secure and more stable than it was before i signed this legislation. now that the legislation has been cast, he did not have to take my word for it. if you will be able to see it in your own life spaves. one leader said this would be armageddon. well, two months from now, six months from now, you can check it out. we will look around. we will see. [laughter] [applause] you do not have to take my word for it.

so what works and our system will not change. and but the people are happy with the health care they have got. that will not change because of the legislation. here is what will change. here is what will change right away. this year, we will start offering tax credits to 4 million stall -- small businesses to help uncover the cost of coverage. folks like ryan will immediately get a tax break so he can afford the coverage he already is providing for his employees. because of that tax break, he may decide to hire a couple of more folks. that is because of this legislation. [applause] this year, tens of thousands of uninsured americans with a pre- existing condition and parents

whose children have a pre- existing condition will finally be able to purchase the coverage they need. that means folks like natoma canfiel will have access to affordable insurance. that happens a share. [applause] -- this year. this year, insurance companies will no longer be able to draw people >> coverage when they get sick or place lifetime limits on the amount of care they can receive. this year, on insurance plans will be required to offer preventive care. fisher, a young adults will be able to stay on the parents policies until they are 26 years old. that all happens this year. this year, senior to fall and the coverage gap known as the doughnut hole will get some help to help pay for prescription drugs.

i want seniors to know despite what is said, these reforms will not cut your benefits. they will not cut your guaranteed benefits, period. i would be wary of anyone who claimed otherwise. these are the reforms that take place right away. these reforms will not give the government more control over your health care. they certainly will not give the insurance more control over your health care. these reforms give you more control over your health care. that is only the beginning. the kittethat is only the begin. we finally renewed the health care improvement act after nearly a decade. the other changes will take several years to implement

fully. that is because this is a difficult and complex issue. we want to get the dry. one of the reforms is the creation of a health insurance exchange. this is one of the most important reforms. erigena, it was an republican idea. imagine that. what we are going to do is create exchanges were uninsured people are going to be able to purchase affordable insurance. but they will be part of a pool , just like federal employees are.

it is like a private health insurance that members of congress get for themselves. that is going to happen. when this exchanges up and running, not only because a better bargaining power, will they see their premiums reduced, will people get a better deal, but millions of people who still cannot afford it will get tax breaks. this represents the largest middle class tax cut for health care in our system. it means that millions of people can get health care that do not have a currently. for those of us who fought so hard for these reforms and believed in him so deeply, i have to remind you our job is not finished. we will see to that the reforms are to ministered fairly. this includes reading out waste

and fraud and abuse in the system. that is how we will extend the life of medicare and extend health-care costs for families. it is through these reforms the we achieve the biggest reduction in our long-term deficit. for all those folks out there, and you are talking about the school -- fiscal thoughts and did not do much in power, but remind them that according to the cbo, this represents over $1 trillion of deficit-reduction and is being done in a smart way. for those 11 suspicious of reform, do not take my word for

it, go to our website and find a health reform will affect you. it maintains the private insurance system and will work for everyone. it makes it worked for you. that is what reform is all about. as long a road is this has been, we all know our journey is far from over. there is to work to do to rebuild its economy. there is still work to do to spur on hiring. there is work to do to improve our schools and make sure every child had a decent education. there is work to do to reduce our dependence on foreign oil.

the challenges have been allowed to linger for years. as we tackle all these other challenges that we face, we can take an excess of confidence. it is still possible to rise above the skepticism, the fear, because the know it is possible to propel our duties to one another and to future generations. yes, this is been a difficult to years. there will be dead on days ahead. but is always remember the lesson -- we as a people to not shrink from a challenge. we overcome it. we do not shrink from our responsibilities.

we embrace it. we do not fear the future. we shape the future. that is what we do. that is who we are. that makes as the united states of america. god bless you. god bless the united states of america. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> in a few moments, timothy geithner testifies on capitol hill above the government's role in housing and mortgage market. in about two hours, a hearing

on the president's nominees who have the transmission security administration known as the tsa. after that, we will be aired the event with president obama setting the health care bill and the. >> an examination of the government's role in housing. the chairman of the homeland security subcommittee on borders, henry cuella will take your questions about drug trafficking we will discuss the congressional agenda with richard burr of north carolina. we did get white prison populations have declined for the first time in nearly 40 years. we are live on c-span every day at 7:00 a.m. eastern.

>> google close its search engine in china this week because of concerns over government censorship. tomorrow, a commission members of the congress will examine and regulation in china. it is led to a p.m. eastern. >> now and finance hearing on the future of the housing and mortgage market. members heard about the federal role in housing from treasury secretary timothy geithner for about two hours. >> thank you for giving me a chance to come before you again. i want to complement many of you for pointing out the challenge requires a broad but at the full range of government institutions in the housing market. this is a complicated question.

fannie mae and freddie mac is significant role in this crisis. they were about to take on excessive risk. their potential class pose a threat to the entire american financial system. the operator with the perception of backing which allow them to take on leverage and build up a routine portfolio in size they never would have allowed. the government not move quickly enough. it would have protected the system from the year. this committee understand that these figures were not unique. that is why you moved late last year to pass a comprehensive state -- set of reforms. the figures are said to betty. -- the failures are symptomatic.

the powerful listed on tremendous amount of risk. there is a buildup in leverage across the rest of the financial system. private companies and institutions were also becoming over leverage. they are offering credit that to many americans cannot afford. underlying all of this was the unrealistic assumption that housing crisis would always go up. over the past year, the head and attrition has made important progress towards comprehensive financial reform and it marks the beginning of the next stage in the process of reform, and value it had to bring reform to the gse's and the entire housing finance system. . .

>> we believe they should have access to mortgage credit to provide financing for affordable rental housing and ownership. to protect consumers in safeguard our system. effective reform has to end the system in which the but if it -- benefits were captured by shareholders. as you forward, we facilitate a transition. want to be clear. a treasure remains committed to supporting the continued activities of the gse's in conservatorship. we will make sure they have sufficient capital.

we will be very careful not to pursue policies or reforms in any way that could threaten or disrupt the issues. thank you. i the forward to your questions. >> thank you. w2hfirst of alle waiting three months for the hearings. >> it sometimes breaks out of the bounds. the other hearing was three weeks ago. i have a problem. we did have a hearing many

hearings were by the minority. he also said he was uncomfortable. he mentioned his efforts to rein things them. history gets forgotten here. the republican party control the house from 1996 through 2006. no legislation became law at that point. the house did pass the bill in 2005. many of the republicans supported it. some opposed it as too weak. some thought it was not a good bill. they thought it was a republican bill. the notion that some of us -- that we inhabited the body, that we somehow captured his mind --

i am not sure what it is. it is true. they offered an amendment to strike the higher costs low and amendments. he did get some support. 2005 was under republican control. 168 republicans voted against it. but frontier mr. baucus -- my frontier mr. baucus, mr. boehner, these are our tools. you do not know how good we are. i am getting these people to vote. his bill does a little better. the same people voted it against him.

this notion that it was the -- by the way, -- >> will the gentleman yield on that? but i will yield. consent. >> i think my words actually were to the secretary that some members of this committee were uncomfortable with discussing this issue. i am looking at my notes. i never mention the democrats at all. i think the gentlemen protests too much. >> i thought he had said that people on the other side. in fact, he was referring to ms. miller, mr. cantor, i accept my correction. i appreciate making sure that people know that he was criticizing them, not just some of us. he got 70 republican votes,

people voting against him. the bill that the republican house passed was denounced by the republican president. i remember him saying that he could pass this legislation in 2005 if he had not gotten the one finger salute from the white house. mr. snow was in favor of going forward. what happened was the republican senate and the republican house had a fight and no bill passed. come 2006, mr. paulson becomes secretary of the treasury. he asked for permission to negotiate with the congress whom he admires over the objection of many others in the white house. he is negotiating with me, in the next election, the democrats got a majority. he points out in his book that he -- we passed a bill that he

said was far from perfect, but was still better than the republican bill in 2005. i apologize to the judgment from new jersey. i thought he was saying it was the democrats that had done this. he is talking about the democrats at the republican leadership. i do remember this, they were outvoted by the democrats and some republicans. in 2005, the records are all here, no amendment either in committee or on the floor and that making the bill tougher on fannie and freddie that received a majority of republican votes past. in other words, the bill that passed committee on the floor -- in no case did a majority of republicans get overwritten because the minority of republicans were with the democrats. that is history, and we have to

go forward. i believe that in regard to the current situation, there is agreement that we need to replace fannie and freddie. there may be disagreement about whether doing that is enough, and whether or not we need to also figure out if we need to restructure the federal homeowner banks. and do we need to provide any more authority in terms of the liquidity of the secondary mortgage market? in some ways, they are harder intellectually. the gentleman from alabama. >> there is a question in there someplace. [laughter] >> this will not come out of the gentleman's time. each member has five minutes. >> secretary geithner, how can you say that regulatory reform bill in the senate is comprehensive? . .

>> i create to be part of overall reform. for reasons i think you understand, we decided to do this in two stages. we are not the beginning of the next stage. is a be a complicated process. berglund to have to take a careful look across the institutions that operate in the markets. they are part of the system that work very well. >> fannie mae and freddie marcc not a part. >> a lot of things went wrong. if it would allow for a long time. things change at the beginning of the decade. use of fannie mae and freddie mac build of these portfolios.

they started to provide guarantees that ultimately resulted in taking on more credit risk. but mistakes were central to the problem. >> i have to disagree with you. in 1997, they started making loans without down payments to people with questionable credits. i think it was a disaster waiting to happen. several of vested peak on the house floor at that time. they resisted clinton and mr. sergeant efforts to relax. >> i was not a combatant in these debates there is a long period of advocacy.

the efforts were not successful. that is a very consequences. consequential result. some alternative 7 suggested. there are some from state and local taxes. there will compete against each other with the government subsidy and issues, isn't a better alternative to do what we republicans are saying? that is to phase of the government subsidy. they are competitive and market based environment.

i agreed that i do not think either options he began with looked particularly appealing. ch two? >> full nationalization or creating a full new class of g.s.e.'s to compete with each other, those do not look like appealing options to me. i have not had an opportunity to look in detail at your proposals, but i will. i any you ended by saying a transition to a world in which you phase out all government support in any form? is that what you said? >> particularly a g.s.e. that has a line of credit with the treasury or ability to borrow from the fed or state and local government? >> i personally think we need to end a system in which you have this awkward combination of private$cñ shareholders with a broad sense of implicit support.

i think that system was a terrible mistake. those mistakes were very cons consequential. as we work together to create a new situation to create our current room we should at least agree we should not recreate that fatal mix of public and private shareholders in the same institution. >> you know, i think as long as you have a government entity competing with the private market, you subsidize them in anyway, it is unfair competition, and i think it crowds out the private market. i think we have seen the result of that. of that. >> i think, at the heart of this debate will be to think about what is the appropriate role for the government and providing some form of guarantees to insure more stable housing finance and what role should the private market space. that is the fundamental question we face but it wish to take a fresh look at that. that to be critical.

>> gentleman from pennsylvania. >> thank you very much. welcome back. it seems to have been remiss. you an opinion for a week. >> i've had the privilege of doing this over the last week. i look for many more. >> i thought part of mr. volcker's testimony was late -- a lightning. he was calling attention to the difficulty of getting the regulators to regulate in accordance with their authority. to a large extent, i listened to the banter back and forth. i think you are taking the correct expected that his sister.

he answered very serious questions. i happen to agree with the. with all the errors that may have occurred with fannie mae and freddie mac, the reality is for 30 years, we had a relatively stable real estate market that functioned very well at times so we did not have stops and starts. the question comes to mind is, what are we going to be able to do about it when this congress passes authorization. federal reserve to create and control mortgages and how they are made and who is allowed to get them and they don't exercise that influence? and regardless whether the republicans were in power for the 10 years that that failure occurred or whether the democrats were in power we can see that at some time in the future one party will be in power and we are not getting the

anticipated results from regular lateors that at least in policy we pass here as a matter of law. should we start with that proposition and see -- because it really doesn't matter combha we do here if it is not implemented. what plans can you make or are you intending to make for better implement asian for -- implement ation for public policy? >> i think you have to make sure the institution has the authority and ability to put in place those constraints. amung the many failures -- among the many failures is we did not give them the authority to set capital requirements high enough to prevent taxpayer loss in those entities. i think that is the most important thing. if you don't have that, nothing may be possible. you have to make sure congress

is holding those oversight bodies accountable overtime. i think you have to start by making sure there is clear authority that can impose systemic damage to the financial system as a whole. >> are the independent regulators too independent in terms of when they seem to be going astray in what they are doing? neither the executive nor the they are independent. >> i think weçuv created a syst that put a lot of challenge on the reag lateor -- challenge on the regulators for the following situations. they were held to quite high standards for consumer regulation, but there were areas that had no effective oversight or enforcement in place. when you do that, risk tends to migrate from where it is con strained to where it is unconstrained. it tends to move to where the

situation is more compliant or the regulator less experienced. a central part would be to make sure you have clear standards enforced evenly across institutions doing similar activities. if you do that, you make the job of a supervisor much easier. if you make it;fx easy for firmo evade those protections, you make their jobs more difficult. when you look at fannie may and freddie mac you find underwritingc/y business migrat from those institutions to parts of the system that were engaged in a competitive race to the bottom in underwriting standards in consumer protection. the most important thing we have to do in financial reform, and this will be true as we move to housing finance is to make sure there are clear standards with clear accountability for enforcing those standards. >> thank you, mr. secretary. my time has expired. >> the gentleman from delaware.

>> thank you, mr. chairman. i have three questions here. i am going to try to put them together. it may get complicated. last month i asked federal reserve chairman bernanke whether fannie may and freddie mac are serving their purpose or whether we should look at different ways to finance mortgages, and he responded the fed has been vocal on this issue for years. he said we need to be cautious about returning to the existing model with conflicts between private shareholders and public objectives. he suggested that public utility approach. my first question is, would you agree or could you comment on that assessment? my second question is, using the federal home loan bank model, is that something you could actually substitute for all this in terms of what we're doing or not doing as far as the future is concerned?

they don't seem to have had the problems that the other g.s.e.'s have had? and my other point is how about eliminating all these systems which is a system whereby institutions making loans have to make their own loans based on what they are doing? i am not necessarily advocating that or saying you do, but i am interested in your opinion. >> i amany interested in your quote from paul volker about what i think -- what he think happened. i think he's right there. i think your options are something we should take a careful look at. i think the federal home loan bank system is not without challenge today. i think as the chairman said at the beginning, when you look at the housing finance sectors, you have to look at the l.b. finance as well to make sure it can play the role it is designed to play, again, without leaving us without too much risk in the

future that the government will have to come in and underwrite those losses. you asked if it is possible for the government to play no role in providing for the mortgage finance plarkt through explicit guaranteees, subsidies, support for liquidity. i think there is a -- there is certainly a pure theoretical option in which that may make sense, but my own view is this will probably be a good economic case for some continued provision of a carefully designed guaranteee by the public sector going forward. housing markets are so critical to overall economic activities, they played such a large role in people's wealth, the perception they are very vulnerable to volatility. when you experience broader financial markets, shocks to the financial system. because of that inequal housing markets play, i think there is likely to be a good economic case that is likely both

conservatives and liberals could agree on for the design of a carefully calibrated guaranteee appropriately priced that would continue in some form. >> what do you think the time table on all this is? we have had a lot of discussion, some hearings now and that kind of thing. is this something you feel needs to be addressed in the next two or three months or within a year, or do you have any thoughts about the time-table and how quickly congress and the administration should move on these issues? >> i think realistically it will take several months to do a careful exploration and shape legislation that could command consensus. i think we're at the point we can start that process in ernest. i think we should try to get it writhe right. i don't know why this should take years. i think wreel really we're at the moment where there is a huge compelling need where we design this successor system, and it is

hard for anybody to argue that we can live with the system as it now is indefinitely in the future. i know people are worried we are not going to take advantage of this moment forever and put it in place at this moment because many people tried in the past and failed to get consensus. i don't think we face that risk because no one can look at the model we have today and say we can afford to live with that model going forward. i would suspect will you find broad support for reform. the challenge will be to design something we think will work better in the future. >> i would agree with you that it is goingw to take time to pu it together, but i#lá would hope could work on it together as rapidly as possible. there are a lot of dollars out there and a lot of reflection. thank you, mr. secretary. i yield back. >> the gentleman from california. >> thank you very much. fa you, mr. secretary for being here to discuss fanny and freddie, g.s.e.'s that we depended on for many years to

provide mortgage support. mortgage financing for low and moderate income homes. with the missteps about fannie may and freddie mac and to the sub-prime mortgage market during the past several years and the resulting conservorships they were given little credit, they developed a fixed-rate 30-year mortgage that made mortgage credit=yñ ownership available to millions of americans families. these were the good aspects. i won't run away from that. i know that since they have been in trouble and some of us have been accused having given them so much support that people are sometimes hesitant to say that. i believe they dove into uncharted waters when they followed private firms into the subprime market in an attempt to increase market earnings. this effort, to me, earnings

targets may have been the fatal flaw in their structure. if they had not been so focused on quarterly earnings reports, they may have weathered that storm. having said that, we continue to have a great need for low and moderate income housing in this country. this committee, led by chairman and strongly supported by members of this committee particularly on this side of the aisle, are supporting a $1 billion housing trust fund, national housing trust fund. that's important to us right now. we were, we thought, going to get resources from fanny, freddie, and that's not possible at this time. do you have anyway -- any way or do you have any ideas how we can support this housing trust fund? i would like to hear about that. >> i think what you said at the beginning is important for people to understand.

our housing finance system did work remarkably well over a period of many, many decades. it was in many ways the envy of the world. things started to change in the late 1990's and in the last decade. you saw a dramatic increase in risk on their balance sheets and a substantial erosion in underwriting more broadly. as we know, those mistakes caused a huge amount of damage. i agree with you that it is important as we think about the future to make sure we retain what was good about this system. i don't think it will be 10able to recreate the system as it exists in the future. in the future, we will have to do things -- we will have to do fundamental change if we are going to achieve the objective you laid out at the beginning. we are, of course, preparedeáé work with people in the committee to find ways to provide continued support for the housing trust fund. i'm not in a position to describe in precise detail how we can do that, but we do have some suggestions. >> i freeshate that vemp.

-- i appreciate that very much. we look forward to working with you on that. as i wrap this up, i would just like to be clear about whether or not we are talking about fanny and freddie formulated perhaps in different ways to continue the mission without the risk or are we talking about getting rid of it all together? what are we talking about here? >> well, i think as many of your colleagues have already said, i don't think there is a credible argument that we can polish, put out of existence these institutions today. that would not be responsible. one could not defend that. i think we need to be careful as we work together to design the future of the american housing finance system. we preserve what was good, but we end what was too risky. >> that makes good sense.

in the interim, i appreciate your reputation that you will help -- your representation that you will help us do something. we need something while we are trying to reorganize those g.s.e.'s. thank you. >> i want to stress again the administration was committed to work with us on this. we are talking primarily about rental housing. we are not wooing out home ownership. but many of us believe we did too much in terms of rental housing and the right finance in terms of rental housing avoids the other problems we have had in the past. the gentleman from california, mr. roice. >> mr. geithner, i want to thank you, and i also want to thank you for the period of time when you were at the fed. i went back to my notes. i counted 15 times when the fed came before congress and warned us about the moral hazard with respect to the g.s.e.'s. i admit we were in the minority. those of us, i think there were

about 70 of us, who listened to the fed about this argument, about the over-leveraging. my amendment on the house floor was not actually written by me, it was actually written by the fed, just as over on the senate side. chuck hagele's amendment was about the ash trauge going --@@

g.s.e.'s were a large driver in the growth of derivatives market and in the non-risk-adjusted trading that went on? the point i'm trying to make is that these entities is that because of the presumption, because of the moral hazard, the same argument you were making to us, just like investors in their debt believed they were triple a the counterparties here believed they were triple a. but here it had additional significance. so they played a big role, i

think, in the growth of the derivatives market. how do we mitigate that going forward? >> g.s.e.'s take on two types of risk. a lot of the mortgages are guaranteeing their 30-year fixed rate mortgages. they need the capacity to hedge those risks. they need derivatives markets to hedge the risks on their books. i think what they did there was necessary. again, the central failure of oversight of the g.s.e.'s was not to force them to hold enough capital to back their commitments. they took on more risk than they had capital to support. now, this committee has passed a sweeping set of reforms to establish oversight over the derivatives marketsment -- markets. those reforms would make sure you could force institutions to hold capital, would force standardized derivatives on to central clearing houses where you could regulate and supervise

margins. it would give the f.c.c. the authority to police those markets, and iti.÷ would bring broad transparency to trading in those important markets. we think those reforms would be -- are necessary to and are central to to reduce the substantial risk that comes in the growth of those markets. i think we would be doing a more -- doing a lot to create a more stable system. >> i understand that argument. but there is still, you still have the moral hazard problem because of the presumption of the government-bab backed -- because of the government-backed guaranteee. when you and the treasury come forward and say we've got to make sure they don't over-leverage. they were over-leveraged at 101. they were involved in arbitrage big time, and all the fed was asking was the ability to

delargee this portfolio arguing that if we slowly did that, we would avoid the bust in the market, we would avoid the systemic risk that would otherwise hit us. that risk did hit us. the fed turned out to be right about this. how do we overcome the fact that when we create a government-sponsored enterprise it becomes so powerful it leans on the very institution that was supposed to regulate it? >> even without the many failures in the g.s.e.'s, what happened in the derivatives market posed significant danger to the market. we would have to impose standards over the derivatives markets themselves. you are right to emphasize, the heart of all financial crisis when you have too much leverage and not enough financial capital to back commitments. that was pervasive across financial systems, not just in the g.s.e.'s. >> i have a few more questions for the record, and if you wouldn't mind getting back to me in writing, i would appreciate it.

>> thank you, gentleman. and i recognize the gentleman from new york, but i ask for 20 seconds, if you would yield to me just to say that, yes, the fed was complaining about fanny and freddie buying up mortgages, but the fed at the time was refusing to use the authority congress gave it in 1974 to stop the madagascar bad mortgages from being made in the first place. they were worried about the secondary markets when they were worried about their opportunity to correct the primary markets. if the fed had used the authority that mr. greep now acknowledges you could have used, you wouldn't have had those bad loans in the first place for fanny and freddie to buy up. >> thank you, mr. chairman. in 2007 both fanny and freddie invest in to a very successful affordable housing project in the district i monitor -- i am honored to represent. over 225,000 live in this

affordable stabilized risk housing. fanny and freddie were the senior debt holders in a $22 billion mortgage-backed securities deal that included the peter cooper debt. it was well known in the press and by economists and people looking at the "deal" deal, they knew at the time that the rental income on the sky town property would not be sufficient to meet the owner's debt service obstacle gages. the owners knew they would have turn over or convert affordable housing in order to increase the rate of turnover. hundreds and hundreds of my constituents, the tenants were dragged into court to defend their homes on frivolous lawsuits. knowing this, fanny and freddie, still invested in this debt. i would like to ask you, secretary geithner, what can be done to prevent g.s.e.'s from

investing in properties that can only be profittable if you convert housing to market rate by forcing out certain tenants? certainly working against the mission of fanny and freddie to build or provide a base for affordable housing? i am working on legislation with the chairman and others to ensure that enterprises cannot receive affordable housing goals credits for investments like the one they made in the sky town debt, and do you believe they should receive housing goal credit for this type of investment that they know cannot continue to provide affordable housing? >> congressman, i don't know, but i would be happen to spend time talking to you and your staff about that particular problem and how we can prevent this kind of thing from happening again. i can't tell you now what is possible in that dwrare. i understand your concerns, and i'm happy to work with you on that. >> thank you. on this vain, new york city has a growing problem of

over-leveraged multi-family properties, including this project. what incentives can we put in place to encourage g.s.e.'s and community banks to work with local housing authorities to ensure affordable multi-family buildings are sold to buyers who are in the business of preserving affordable housing? we're working hard to build affordable housing, yet when it is sold, it is sold in an umbrella that absolutely makes it impossible to continue as affordable housing. >> my colleagues at the treasury have spent a lot of time working on those issues, and i would be happy to have them come with you and talk through the issues we think would a timely manner in order to prevent

tenants from a simultaneous with us foreclosure -- from a tumultuous foreclosure process? what are your ideas in that area? >> again, i would be happy to spend time talking to you about that. in the market we created for housing and finance, we have made it much more complicated in many ways to work out economically sensible restructuring of loans backed by real estate that may have been possible in a more simple system in the past. you are citing one example of that. there are thousands of examples across the country of that. i think the reforms that this committee has put forward to try to improve the way that securitization works in that area would be helpful, but they will take time coming, and they will not provide immediate relief to the problems you are facing, but we will spend time looking at how to address the

specific problems you referred to in new york. >> thank you. my time has expired. >> the gentleman from illinois. >> thank you, mr. chairman. mr. second, it -- mr. secretary, it seems the g.s.e. have bifurcated consumer regulation from safety and soundness oversight when h.u.d. oversaw freddie and fanny's affordable housing mission and as its safety and soundness regulator was $227 billion bill for the american people. do you think that we're -- the administration is poised right now to make the same mistake by creating a consumer financial protection agency even if it is in the federal reserve and it has been some places have talked

about it being a separate agency. can you explain how the financial institution supervision would be -- do you think it would be more effective if there was one regulator to focus on consumer protection and safety and soundness? >> congressman, it is an important question. we are now living with the consequences of this system which for many, many decades gave bank supervisors the responsibility to write and enforce rules for consumer protection. that system did a terrible job for the country. it did a terrible job of protecting consumers, and it did not do an adequate job of protecting safety and soundness of the banks in our country. there areápk failures in both te two areas, and our judgment is, you are going to get better outcomes in consumer protection and better outcomes in safety and soundness if you separate those functions. we proposed that.

i don't know if this helps the argument, but secretary paulson in his financial blueprint, 2008 maybe, proposed exactly the same model which is to separate sun protection from safety and soundness provision with the baidoa basic judgment that that would produceuóñ better safety soundness regulation and better consumer protection. >> so you would really advocate for separating it? >> absolutely. and i don't believe -- i've heard this argument a lot from bankers and supervisors, and i don't believe that there is -- i don't believe it is a strong argument. again, look at what that system produced. a colossal devastating failure. again, if you -- let me try one simple example. why should there be any conflict between rules designed to give consumers adequate disclosures so they could make choices what type of mortgage product to take and rules designed to enforce sound underwriting standards for

consumers? i do not see the basic for conflict. in the bill this committee passed, in recognition of that concern, there are a careful set and checks and balances against the consumer agency would somehow write rules that could imperil point basic financial system. i think those jobs are better separated. president bush and secretary paulson had the same view in their proposal. i think the record of the current view has that judgment. >> the federal reserve was really responsible for writing the rules and regulations. >> i think that's the point. i think that you want bank supervisorers worrying about liquidity. you want them focused on those core things. you don't want them having spent a bunch of time having worried about consumer protection in that job can be better done by a -- an independent consumer agency. >> i guess i see it gively as

with the g.s.e.'s and the bank industries, the consumer regulations and the other regulators was separated and it didn't work. >> again, i respect that view. but in fact, the g.s.e.'s played a generally quite responsible role in what they do did3f in establishing standardized mortgage products and generally they held to better underwriting standards than was true of the private market. so i don't see the failure and success of the g.s.e.'s has undermining the argument from safety and soundness supervision in banks. >> does it create a duplication with g.s.e.'s or with the banking industry that it's something that one way they propose that this will protect the consumers and then the

regulator with safety and soundness and they are in conflict? >> again, if there is any risk of conflict, you can deal with that risk by making sure you have a body that looks at conflict and can pass judgment of conflict. it is unlikely there would be any conflict. >> the gentleman from california, mr. sherman. >> thank you. mr.@@@@, @ @ @ @ @ @ @ @ @ @ @

happen if at the end of the year, the maximum home limits not only declined from 739.750 but to the fact that the government resets the loan to the current median price. in los angeles this means the f.h.a. limit drops from $729,000 to $376,000. the g.s.e. limit, fanny and freddie, drop from that $72829 to $417. i don't expect by the end of this year we're going to have a robust middle class home finance market independent of the g.s.e.'s.

what happens if you have that sudden inability to buy and sell a home anywhere in some of our country's largest areas, what happens to the national economy? could it cause a second dip in this recession? >> congressman that's a very particular question. i don't have a judgment now about what congress should do with those temporary increase in the conforming limits. i think it was appropriate that congress extended thefment i fully -- extended them. i don't have a judgment yet. i would say the following, though -- i think it is important for people to understand that the basic mistakes most governments make in dealing with real estate crises is they tend to prematurely declare victory. say that the great risks are behind us, and they tend to lock back support too quickly, not too slowly. i think it is important to recognize that this housing

crisis, financial crisis, has caused a huge amount of damage and it is going to take quite a long time for us to heal and repair that damage. i don't know how long it is going to take, but it is going to take some time still. >> do you think we're ready by the end of this year to see the g.s.e. limit drop by half in america's most important and largest cities without damaging the economy of the country? >> as i said, i'm not in a position to make that judgment. we don't need to make that judgment yesterday -- judgment yet. i want to underscore, i think your basic point is you have to be careful that we are doing carefully designed sensible things to help facilitate this repair process and recovery. >> this is just for the record, because i don't want to get you in trouble with the senate. but a year ago today, the president nominated an under-secretary for international affairs.

still on hold in the senate after a year. domestic finance and assistant tax policy on hold. so the question for the record is do holds, filibusters, and the senate practice of not allowing a nominee to work as an acting temporary basis until the confirmation, do those senate practices lead to higher unemployment to companies not being able to find out what the tax regulations are because you don't have an assistant secretary for tax policy? are there hundreds of thousands or tens of thousands of americans unemployed today because of the perqs and progress tiffs of the other body? don't answer that one, for the record. >> can i just thank you for raising that concern and for pointing out that these three senior positions of the treasury

remain unoccupied today. it has now been 15 months since the president took office, and we have a -- an amazingly talented hard-working group of people at the treasury doing a lot of important things for the country, but we need to get those people in place. >> finally, we disagreed on whether the executive branch should have permanent bailout ability to make sure the people on wall street can get bailed out only on the executive branch. congratulations on getting the senate to give -- givingp you that permanent authority. >> actually, we agree on more than you think. as i have said in the past, i would not support, and neither your bill nor the senate bill gives the executive branch the

authority you describe. what it does do, if that management in the future gets to the edge of the abyss where it can no longer survive, then the government should have no other support but to put that into a form of receivership so it can be dismantled overtime. >> we're going to move on. tag the gentleman from texas. >> good to see you again. given the unprecedented support that the federal government, both the federal reserve and the treasury has propped up the securitization market for housing in this country, one of the things that concerns me is that the longer we keep this government presence is the longer that the private sector sits on the sidelines because quite honestly, we do know that

there is some activity pending out there. not to the level that we have had in the past. so what do we do? as i hear you saying, congressman, i'm not really ready to do anything right now. but i'm very concerned that the longer -- it is like a muscle. the doctors tell you, the longer that you don't use a muscle and you keep your arm in a sling, which is where we got the housing finance market today, the harder it is to rehabilitate that arm once you take it out of the sling. how are we going to do that and what is your blueprint to do that? >> congressman, i worry a lot about that risk, and i think you are right to highlight it. i think the main risk we face today, is we have an economy that's only been growing, we have unemployment that's at 10%, higher in many parts of the country. housing market still overwhelming dependent on the government because there is no

private will to provide financing for residential real estate, and it is going to take us a while to get through this and be confident that we have got a recovery from place led by the private sector that could be self-sustaining overtime. the main risk we face today is there enormous damage caused by this crisis. you see it conspicuously in housing across the country. now, if you look at what we have done in the rest of the financial system, you can see we have been very, very careful to unwind, to walk back, to terminate scompend the emergency programs that we no longer need to put in to put in place. we have ended the money market guaranteee fund. the fdic is no longer providing guaranteees for the debt of bank holding companies. we have replaced the overwhelming majority of public investment in banking systems with private capital. we are undoing those emergency programs for the risks you pointed out. he with do not want these markets dependent excessively on

government support in the future and we want to see private markets come back as quickly as we can. housing, though, still has been undamaged. that process -- if you look at what we've done in those other areas, you can see we have been willing, careful, and effective at walking back and unwinding the things that no longer play a useful and effective role in supporting recovery. >> i hear what you are saying, and i agree with that, as well, but one of the big problems here is that we really do not incentivize people to get into the securitization on the private eakt sector -- private sector because we made borrowing very inexpensive. they can borrow very inexpensively. they can go out and borrow the freddie and franny products and there is not a lot of incentives to go out and look for private demand in those markets. >> i agree with that risk. i think if you look, you will have a chance to talk to secretary donvan about that.

but if you talk to him and ed dmarco they have put in place a variety of changes in underwriting standards and how they price their guaranteees. it is designed to help promote the private sector coming back and replacing them as things start to heal, but that process is going to take some time. i think you are right to underscore its importance. i would be happy to support that effort. >> p.m.i. was an important part of the private securitization market, but with the -- what the p.m.i. companies tell me is they can't compete with the federal rates. so sometimes we have to bring a level playing field here so that there is a yield difference there that people are willing to say, i have the higher yield here so i will move outside the current parameters and move into the private securitization. >> it is a question of how we do it. i want to underscore that even

though the economy is growing now and we have brought a measure of substantial measureability to the financial system and interest rates are lower than they were, there is a lot of challenge ahead in the housing financial market, and we can be careful that we're still helping to facilitate this process of recovery. as we transition to a new and better system. >> chairman bernanke is wrapping up his purchase program of mortgages, what do you think that does to the market? >> i would leave that to the chairman to describe, but again, as the fed does the careful responsible thing of winding down its emergency actions, we want to make sure, again, the full complement of government policies is helping facilitate this process of repair. it is getting better. we are making progress, but there is still a lot of damage still out there. >> i want to ask unanimous consent to the national

association of credit unions they ask to be put into the record. g.s.e.'s allow credit unions to allow necessary liquidity to create new mortgages. it remains an important tool for credit unions. they are a valuable resource for low and moderate-income members. has congress considered ways of conforming the current system that we believe safeguards are in place to create a smooth stransigs -- transition and that fannie may and freddie mac not be compromised. that's from the national association of credit unions. the gentleman from massachusetts is recognized for five minutes. >> thank you, mr. secretary. mr. secretary, there have been a lot of big things talked about z very simplistically. i'm not sure i know the exact number. do you know the general percentage of home ownership in this country prior to the existence of fanny and freddie?

am i right to think it is in the 30% and 40% range? >> you mean going pack to the 1930's? >> yes. >> i don't know. >> today it is around 70%, give or take? >> it is about 2/3. >> i look at home ownership. maybe i'm wrong, but i think it is probably the main financial aspect of this country that helped create and maintain the middle class. i come fromjv a neighborhood whe their way into the middle class was the purchase of a simple homezob%ei-i look at fan -- fan freddie mac as symbolic if not responsible for that. prior to fanny and freddie how did people get mortgages? private market alone? there was no government involvement? >> that's right. >> for me, that's what this is all about. i guess i understand that fannie may and freddie mac like everything else needs to be

retooled, but as far as the current economic crisis, did fanny and freddie create the derivatives market? >> no. >> did they participate in any worse or differently than a mill other private event -- entities? >> differently, but i wouldn't say worse. >> so they did some bad things but no worse than any other private entities in this country around the world? >> i would say they were better than most private entities in these markets. >> and that is my problem. i'm not going to suggest that they don't need toob retooled. i'm not going to suggest we don't need to revisit them, or that they don't need to be overseen or destroyed and made up in a different fashion. i came today to listen to give ideas. i will tell you that for me, subjecting potential home owners to nothing but the private

market has been tried in this country for 150 years and failed to create a middle class. since government got involved through fanny and freddie, we created the middle class and we sustained the middle class and when we are done with this, for me, that is the goal.=jç the only goal. as a matter # @ @ @ @ @ @ @ @ @r

talk to the second panel. >> thank you, mr. secretary. i note it was about 18 months ago that the president was elected. i think it was 13 months ago to double taxpayer liability for the g.s.e.'s. nine months ago -- >> not to double liability? >> under the original preferred stock agreements? >> under the law that the congress passed, you gave my predecessor unlimited authority to make sure fanny and freddie could meet their obligations. at this point, they made sure they had whatever capital was necessary to meet those obligations.

[captions copyright national cable satellite corp. 2009] [captioning performed by the national captioning institute] >> credit card companies, community banks, hedge funds, finance companies, payday lenders, pawn shops, auto companies, but still no plan for the g.s.e.'s except seemingly unlimbed taxpayer exposure.

so one member's opinion, mr. secretary, with respect to the timing, i just think that the timing is unacceptable. but let's talk abouted taxpayer exposure. clearly, you are familiar with the numbers. c.b.o. estimates with the next 10 years $376 billion. we know there are trillions more of exposure there. so on the one hand i see treasury continues to monitor the situation. i guess my greater concern is, is there in fact a defacto plan perhaps not by design but perhaps by accident. i note that the chairman of our committee in january stated that fannie may and freddie mac are now, quote, basically public policy instrumentsíúu of the government. charles halderman said, quote, we are making decisions on loan

modifications without being guided=ñ solely by profittabili. daniel mu fsm dd said, the government is running fanny and freddie as an instrument of national economic policy not as a business. it appears to many of us, and i'll give you an opportunity to disabuse me of the notion or accept the premise that what we now have are the g.s.e.'s an instrument at of the administration to fund taxpayer funds into frankly a failed foreclosure plitgation plan with nothing else in sight. i'll yield to you, mr. secretary. >> our strategy is to fix this damaged housing finance market, to make sure this country recovers from the trauma caused by the recession. we're going to do that as

carefully and as quickly as we can. as part of that process we will work with this committee to lay out a comprehensive set of reforms to the housing and finance system including the g.s.e.'s. but our obligation now and our priority now is to try to make sure, again, we heal what is broken in this housing finance system and we help this economy dig out of this terrible mess. >> there is still no time-table for that, is there? >> as to what, the recovery? >> for a plan dealing with the g.s.e.'s? >> again, we're looking forward to having this debate about reform. you are not going to care more about this than i am. i am the one who has 0 to preside over a broad assessment of commitments -- >> it is a simple question. is there a timetable or not a timetable? >> we will spend time digging out of that mess and making sure we work with you to leave our cut country in a better situation. >> is there any, in your mind or

the administration's mind, is there any reason that inherently we must have a government sponsored entity to securize mortgages in order to have a stable home ownership in america because i know many other nages do not have g.s.e.'s? >> this is the central question as you contemplatevb reform. as i said yesterday, i think there is a quite strong economic or public policy quaste case for preserving designing some sort of guaranteey by the government to help facilitate a stable housing financial mark. it can't be the one we have today or we've lived with over the last decade, but we are likely to conclude, as our predecessors have that there will be some rules. >> thank you, mr. secretary. the gentleman from texas. >> thank you, mr. chairman.

>> i also want to say welcome to our secretary.[, as you know, most of us and most of my colleagues are aware, april is national financial literacy month. throughout that month special attention will be focused on efforts to increase the awareness of financial education and work ong personal finances, increasing personal savings and hopefully reducing personal debt in the united states. i work forward to -- look forward to work on financial capability issues with you as well as with michelle green your deputy assistant secretary of the financial office of education. i have listened carefully to many of your responses, and i agree agree with you that the system for protecting consumers in the mortgage market was and remains fundamentally flawed. and consumers should have the information they need about the

costs, terms, conditions of their norts. we should be incorporated into legislation reforming the house finance system. i'm sick and tired of listening to some of the folks who signed contracts and showing me the 20 or 25 items that were listed on fees. something very different than what it was years ago. i am pleased that the truth in lending and real estate settlement procedures will be placed under one roof in the consumer protection act. we should address my many concerns regarding the implement tation of both of these acts. mr. secretary, do you intend to provide housing counseling in languages other than english? >> did you say acounseling? >> yes. >> i believe that it is true today that the substantial support congress is authorized

to give in support of counseling agencies across the country includes many nonprofits who provide those services in languages other than english, but i would have to check that for the record. >> i was pleased when i visited the federal reserve banks in dallas that they are!zy supporting these financial literacy programs and have it in eight languages in texas, and it is not uncommon to have school districts that have 40 or 50 languages spoken by some of the limbedps÷ english profishent students, so this is something very important, and i know there are some of my colleagues in congress that don't want anything but english in materials used by some of our federal agencies, so i degree with that. i think this is such a big investment that it is important to me that this concern be addressed.

fannie may and freddie mac as government-sponsored entities are responsible for helping many middle class families in our district in buying a home. so it is important to me that they survive through these difficult times. what actions will treasury take to ensure that they survive? >> congressman, as i said, we will do everything we can to make sure they can not just meet their obstacle gages, but they can continue to play an important role in supporting housing financing markets as we work on the design of a better, stronger, more effective housing finance system in the future. we are completely committed to doing everything necessary to make sure we allow them to play the very important role they now play in providing a stable source of housing finance for this country as we try to dig out of repair what's broken in our fenl system.

-- in our financial system. >> i have been a strong proponent of community banks because my district is one that has a very, very large number of community banks, and that is one of the sources of borrowing. some of them bought stock from fannie may and freddie mac and took a huge loss. is anything being considered to help them so that their balance sheets can look a little better because of the losses they took? >> congressman, we have propose8 legislation to the congress that would establish what we call a small business lending facility and this facility would make capital available to small community banks so that they have more financial resources to support lending to their customers as wej]k come out of s legislation. and this legislation would establish a $38 billion lending facility. it involves very, very modest costs rvings and we:÷ think thi

is one of the most important things we can do to help small community banks continue to get through. >> what is the time table to make that happen. >> the leadership of both are considering taking up a bill which includes a set of tax provisions other senate mechanisms like the one i just described. >> thank you, mr. chairman. in your testimony you briefly talked about an tern fifth to securitization. he -- paul kanjorski and i wrote a bill. i wondered if you looked at it yet? >> i haven't looked at it yet. i know you have been a long supporter of covered bonds. we have a covered bonds system in the fhlb. anyway, happy to work with you

on that. i think looking at the covered bond issue will be important in looking at in the agenda. >> would that be helpful to get done sooner rather than later this year? >> i don't know. my basic problem when we are looking at financial reform of the private financial system in the united states, you want to look at comprehensively the full compliment of interests tuitions, but, again, happy to work with you on that part of reform. >> a couple weeks ago, the talking about, we had the budget hearing, i chose an amendment that went down party lines which would put the g.s.e.'s on budget. back then i asked -- chairman bernanke and i asked him his opinion of this. i also asked him another question, and i'll ask you the same question. is the debt of the g.s.e.'s

sovereign debt? >> congressman, you know this is a very technical question. the appropriate accounting treatment of fannie may and freddie mac and there are obligations. >> let me give you two opinions -- >> yes and no? [laughing] >> g.a.o. agrees with the judgment we have made. it does not think it is appropriate for us to consolidate. we follow that basic model. on your second querks let me repathe peat again what i said in my written and oral statement. we will do everything necessary to make sure these institutions have the capital they need to meet their commitments. >> i understand that from reading your statements. i am not a chairman of the fed. and the chairman also recognizes and understands the difference because in his statement he says "i have noted the fanny and freddie debt did not have legal

standing as treasury debt" so he recognizes there is a distinction between sovereign debt and g.s.e. debt. >> they are different. i want to emphasize in saying that they are different i want to make sure you understand that again we will make sure they have the financial resources necessary to meet their obligations. >> and i undp. and the chairman says the same iggw@@@@@@@ @ @ @ @ , @ @ @ @ @

these institutions have the ability to meet their obstacle gages present and future. >> so the chairman is incorrect when he states there is a distinction between the debt they have and sovereign debt? >> no, i don't think so. you know the answer to this question. they are different types of obligations. but i want to make it clear that you understand we will use the authority congress gave us to make sure they complete their agreements. >> it is not sovereign debts, but it is debt we will stand behind. >> i will try to answer it the same way i already said it. >> is it sovereign debt? >> no. not in that sense. >> well, that's good. >> i want to make sure --

>> it is debt we are going to stand behind. >> we are going to make sure these institutions have the resources they need to mee meet their obligations past and future. >> and i understand that. it is not sovereign debt, but it is debt we are going to stand behind because congress has given you authority to stand behind that debt. >> for very good reasons, yes. >> i still have 30 seconds left? >> three seconds left. we'll make it 10 more now. >> do you have any comment on the fact that bloomberg is saying that the bond market is saying to lend to warren buffet than to the administration? >> i would agree with that comment and i would say the following -- it is very important that the congress work together to make sure we put in place over time a set of policies that will bring down our fiscal deficits to a more sustainable level. that is very important to the strength of this economy. it will be important to the

future growth of the american economy economy. we look forward to working with members on both sides of the aisle to bring those deficits down to a sustainable level. >> the gentleman's time has expired. tom -- the gentlewoman from new york. >> thank you, and welcome again, mr. secretary. listening to the divide, -- debate, i can't help thinking about how i bought my first home years ago, in nursing. back then they didn't make ever money. so every door was closed to me as far as buying a home. it was my parents home. i was a good risk. it was through the g.s.e.'s i was able to get a loan. never missed a payment. paid it off. so there are a lot of us out there that certainly took advantage of it.

statistics, the majority of middle income families will do everything they can to make sure they always pay their mortgage so they have a roof over their head. that's their dream. that was my dream. so i was just curious, when we started going into this spiral downfall, and with the g.s.e.'s and also with the subprime lending crisis that we saw rblingt -- saw, who actually had the worst record? i know in new york city, we had -- i was reading someone's testimony that 13-20,000 loans defaulted. that came through a housing agency. so we need to look at things, how to change things. but i agree with my colleague that financial literacy is going to be an importantj> very good question. the program that we have put in

place to make it possible for homeowners to restructure and modify their loans is now reaching more than one million americans and what this means is that for more than -- for one million americans they have substantially lower payments which on average are providing $500 to $600 a month more in the pockets of those families than they had before those mod fantastics and we are trying to make sure that as many of those as possible are translated into permanent modifications, and we're going to keep working to make sure this program reaches as many people as they have so people do not have to leave their homes and can stay in their homes mple >> i just -- just one other question, too.57qi u)u$ obviouss and they have the backing of the federal government on that, there are going to be a lot of homes that probably will not be -- they are foreclosed now, they are sitting there. what are the chances of turning some of those homes over into

rental properties where people are getting back on their feet again? >> i think there are substantial opportunities for doing that. again, i would be happy to ask my colleagues at faha or h.u.d. what they can do in those areas. >> the gentlelady from west virginia. >> thank you, mr. secretary. i would like to talk about this a little more simplistically and maybe a little more globally. i got the report this morning that existing home sales are down again for the third straight month. unploifment, as you mentioned, remains too high. we have witness after witness particularly from the financial institutions asking why they are not lending or why people aren' borrowing, lack of confidence, uncertainty. my question is, in this is the

lack of a certain plan forward with fanny and freddie leading to the uncertainty as well? i will just give you a for instance. speaking with a community banker several weeks ago asking him why you are not getting into the mortgage market because the f.h.a. is taking up so much more of the mortgage area, and he said, maybe if you would give me a loan guarantee, maybe i would get into that a little more. are we, because of this, all of the government involvement with with fannie may and freddie mac and dollars and just what you said that we will back up the debt of fanny and freddie, could that be part of -- i know we need to do it slowly, would could it be part of maybe putting it in some mud and making it go slower? the confidence is not rebounding the way we need it to in order to get out of this flood that we're in? >> i don't think so. let me give you my sense of

this. if you talk as we do, and we all do, with community bankers across the country and we ask them what'smk happening on the lending "seven on your side," generally they say loan demand is low. they say supervisors are being very tough on us. to some extent they say they want to know what the rules of the -- they would like to know a little more -- with more certainty what the rules are going to be going forward. i think those are the principle factors of the conditions affecting small lending institutions. i think we can do something about those. the chairman of the deped and the chairman of the f.d.i.c. can make sure their examiners are not over-doing it. we can make sure that we provide capital to small community banks so they have an ability to get

through this. if we pass financial reform that will bring clarity to the rules of the game that will be helpful. but i don't believe that what fanny and freddie are doing now, i think it is overwhelmingly constructive to the process of repair of housing and finance. >> but it is the base of -- but is the base of a -- but if the base of a good solid recovery is going to bezv housing market bouncing back. would you agree with that? >> it will. it is hard to tell the timing now. part of recovery will be more durable housing financing crisis and you will see the housing market come back and take back of the business of housing finance that is now dominated by fanny and freddie and some of the f.h.a.'s. >> on a different topic, and we talked about this a little bit. is that where we have done the $1 billion million modification?

is this affecting the bottom line of fanny and freddie at ale? are you concerned about the redefault rates on some of these modifications in terms of the ones held by fanny and freddie? >> no. the way this bram works for both a private lender for fanny and fend freddie, they do the mod fantastics if the economic value being modified than it would be in foreclosure. these modifications do, they put fanny and freddie in a better position, not a worse position than if noñ"m were happening. >> we are still having redefault rates in those. >> given how high unemployment efforts are across the country, you will stilliéu see redefault rates happen. it is inevitible. we want to make sure we help people who lose their jobs and face the risk of losing their homes, but you will see some risk of redefault rates.

>> thank you, mr. secretary. >> thank you, mr. chairman. welcome, mr. secretary. i think one of the major weaknesses in our housing finance system is the securitization process. i was happy to see that you called that out in page five of your testimony and devoted a section to that. there was an article, i'm not sure if you saw it in this past sunday's "new york times" by gretchen morganson where she points out much of the difficulty with the mortgage-backed security part of our crisis was rooted in the opacity of these products. part of the problem, obviously, was the ratings and valuations that were assigned to these mortgage-backed securities were completely wrong, but because of the complexity and the opacity, folks were induced to rely on just the rating.

that was a real problem. as ms. morganson points out, the bank of england has just issued an advisory, i think they call it a consultive report, and the bank of england risk-manú: division has recommended that -- and they face the same problem. because in england, the collateral is being posted using these mortgage-backed securities. j to what we doing here. and what their solution is, what they are recommending is that there be more useful information, additional information, supplied by those, the issuers who are creating what these mortgage-backed securities, so that individual parties, the market, the banks, will be able to look through and actually vet them themselves rather than relying on triple-a.

i think in our own situation with the feds doing what they are doing, you know, i think especially --kuy you know, theye posting collateral in much the same way. is this something that -- i mean, this is so important. this is such a critical part of credit formation here in this country, it is a greatop thing the securitization if it is properlyly used. it this something we need to look to in trms of getting more information to the market to they can determine this object a -- on a rolling basis, not just a static rating when the issue comes out, but ongoing? >> i agree with you. i think you said it well. bringing more transparency to those structures so investors can look through them, understand true risk in them is very important. it is also very important, as many of your colleagues know, that to bring more transparency to the rating process

themselves. we would like to see rating agencies he -- compelled to disclose more to underpin those ratings and we want to make sure that in the regulatory system that supervisors preside over they are not creating assurances in alliances of ratings. we think that would make a big difference. >> let me ask you about that. in your report it is a little vague about the reform of the rating agency. you do mention it. but can you drill down on that a little bit? >> the reforms that this committee has embraced and which were at the center of our proposals had two pieces. one was to give the s.e.c. the authority to police conflict of you don't want the judgment skewed by model these fimples have been operating -- firms have been operating with. you don't want their economic

interest and the issuer assigning excessively favorable ratings. that's very important. the second was to bring more transparency to the rating process. make sure they have to disclose more information about the implications. that way the investors can bring an independent assessment about whether ratings make any sense. again, the big mistake to underpin everything that happened in the housing markets was that everyone@@@@@ @ @

freddie mac. are you fairly confident -- do you have any confidence that the loans are being originated today and have been originated in the last year are high will have quality loans and are not of the same quality of the loans that were originated in the previous three years? >> congressman, my sense is that the underwriting standards today are much stronger than they were. and i think the people who have looked at this question carefully say if you look at what they are doing today in terms of new guaranteees and how they are pricing them for those guarantees means that the business is in a more stable footing today than it was. >> with respect to the ability

in the long term of having fanny or freddie or a successor agency repaying or earning back the losses over a long-time horizon, do you see that as a possibility? . i would like to explore the bridge loan, the loan that you are making from the treasury to fannie and freddie every month

to meet their obligations. and i would like to explore it in fact that government or the treasury -- if in fact the government or the treasury is going to have to take some losses eventually on these loans. what went into the judgment call of charging fannie and freddie such a high rate on the loan it is making to fannie and freddie, if in fact that only adds to that long-term debt and may exasperate that long-term debt, why are we not dealing with that lower-cost facility? is this money coming out of tarp? >> those are very good questions.

this is under the hera authority, not the tarp. i have been carrying out those responsibilities. what we're doing is making a careful judgment of how best to minimize the extent of losses that taxpayers will bear, max amass promoting a recovery in the housing markets, and we're going to do the best job we can to make sure that we've reduced the risk of future loss of these institutions, and we will look at the broader terms of our engagements. >> you see where -- >> i can see where it would not make sense to charge a punitive raid if we are charging ourselves that. >> a small bank can learn you

the money to make the car loan, you have a $14,000 car loan and i don't know what would have been accomplished here. >> i understand the point that you're making. we reconstructed some of the dead in concerns -- in part due to those concerns. but we want to reduce the risk of all the ones. >> thank you. >> the gentleman from indiana. >> thank you mr. chairman. thank you, mr. secretary, for being here. i think one of the things that has caused continued housing problems is obviously the on in "-- the unemployment rate, that people cannot afford to move into homes or purchase homes. a huge portion of the

unemployment difficulties, at least in my area of the country , and it continues to be so, and i have a business after business after business to in trying to -- they have had their lines of credit cut, not because they missed the pavement, but because the their sales were down 4 1/4. -- for a quarter. they had spent a eight year getting down to the lower line of credit, selling equipment, laying off employees, and telling me they could be adding employs if they were not in this situation. we have jobs bill after jobs bill across the street. the real jobs bill, the folks in the shop tell me, is having a normal credit situation.

where are we going to be as we move forward on this? >> you're absolutely right. many businesses are suffering from this environment, even those who have very good payment history. you're absolutely right. we have a small business package of incentives and assistance, with three important components. one is a series of tax measures for small businesses, zero capital rates on small businesses, or payable expenses appreciation, which we think will be very helpful. the second includes expanded authority for the f bm, and we propose a $30 billion small- business lending facility that would make capital available for small banks so that they could do loans to their customers. we think giving capital to small

banks is one of the most effective things we can do. it can happen very quickly if congress gives the the -- gives us the authority. without that capital, it's hard to raise capital and the private man -- markets. we think the tax incentives, that support, and the lending facility will make a big difference. >> here is the other conundrum. i get e-mails from my friends who are in businesses that said the banks will not lend us any thing. the banks command to the office and they say, we have money to land and we're looking to make good loans. so you tell me -- how do we put these two sides together? the lawyers what typically happens is that you have a bank that may have been are well-run bank overtime but may have been very exposed to commercial real

estate, it has customers it is working with for 30 years, and they find themselves because of judgment and commercial real estate having to reduce exposure to the customer. in explaining that to their customer, they often say it is the supervisor not letting us land. as i said earlier, part of what is happening is that supervisors are being tougher than they were. that is making these problems worse. part of the solution is to make sure chairman barron and chairman bernanke and their colleagues and supervisors are sending a more balanced message. >> that is the message that i would like to give you those. we want to make good loans, not bad loans, but at the same time we want to have supervisors who are understanding the entire economic picture here, that there are good loans that do not have to be extraordinary loans.

it is really choking the lifeblood out of a number of jobs that are available. when we get these jobs back, people will be buying homes again. >> i agree. businesses will see a growing demand for their products again, and they cannot meet that demand because they cannot get credit to add more equipment and apparel. it is a critical problem but congress has a chance to do something about it now. that would be alongside what the supervisors are trying to do. >> i would suggest that the message is that the best jobs program of all, because they are jobs that can come back, but they cannot do it without capital. >> the highest return on the dollar of tax payer money. >> that is our small business guys making it happen.

thank you, mr. chairman. >> will now hear from the gentleman from california. >> mr. geithner, good to have you here today. a lot of people in this country do not realize that fannie and freddie did not hold their loans, which is interesting. 92% of the loans in this country are made by ready and 80 and the fha to date. -- fannie and freddie and the fha today. i am not here to defend them but i am looking at the reality. freddie and fannie mae and some tremendous mistakes. i am looking at the serious delinquency rate in this country, and annie has about 5.3%, freddie is out 3.7%, but in the private sector, jumbo's art 9.6%.

in my congressional district, they are performing better. in l.a. county, the jumbo market is at 10.1%. in orange county, fannie and freddie are 2.1% delinquent, jumbo is 8.9%, fha is 1.4%. in san benito county, 7.8% which is alarming, but the jumbo market is 20.4%. we need to allow the private sector to come lately control the secondary marketplace and get fannie and freddie out of it, but i am concerned that if there was a viable alternative to a gse, where was it in 2006 and 2007? it was not there. at the same time in the mortgage-backed security market, the booming part of the

market was the group that sold terrible bundles to the private sector. many of fannie and freddie's losses were because when they sold the securities, when they take that nonperforming loans out, and replace it with a performing loan, nothing country wider anyone did matches that. the way that they bought the securities, when the investors lost them, they invested in the market and they bought ads were asleep mortgage-backed securities -- actually worth less mortgage backed securities. i would appreciate an answer to that. >> i think you're exactly right. you look at the record of what happened, the most apology -- the appalling damage happened outside of fannie and freddie and happened and thrifts, mortgage finance companies,

specialized finance companies. fannie and freddie's prime portfolio today has better quality day than the average across the market. i think you're right in the basic emphasis, and right now you are right to emphasize that the only game in town are fannie and freddie and the fha, and it is very important and that they in this transition period -- and it will not going -- you will not go on indefinitely, but they need to continue to provide mortgage finance if we're going to deal with the damage across the country, including california. i have not seen an ideal model yet on what to replace this current system with. i think that we will have to take a careful look at how to design a better form of guarantee and support. >> and i am open to that. i am not assuming we have to have freddie and fannie, but what we do if we do not have

them. in fact, nine years ago, we talked about opposing that. i am one who had the amendment adopted in high-cost areas. and i assume that my colleagues disagreed with me. but as i understand it, fha and fannie and freddie, the best performing loans they are making are in high-cost areas, is that true? >> i do not know but i would be happy to check on that. >> the question is, what are the key structural improvements necessary to prevent governments from distorting the marketplace, because some of said they had shorted the secondary market in @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @

guarantees for lower quality mortgages without charging appropriately for that guarantee. the first was a greater mistake, but whatever we do redesigning the system, we need to avoid those errors. >> and the only time that fannie and freddie ever lost money was the year of 1985. other than that, there were profitable, and maybe congress did things to distort their mission and get them headed in different directions, and we need to go back to a time when that mission was not distorted,

when they were making troupe performing loans that met the criteria that they specified. i yield back the balance of my time. >> will now hear from the gentleman from florida. >> thank you very much, mr. chairman. mr. secretary, during this committee's last meeting, i believe, we heard breaking news that said fannie and freddie executives receive millions of >> in bonuses -- millions of dollars in bonuses, all the while this meltdown was continuing. i just wondered if you had any part in signing off on these bonuses when you met on december 24, 2009. >> they are -- they are responsible for proving the

compensation packages. they reach that in consultation with someone i appointed. >> is that a yes or no? >> i was not involved. >> that is all i need. i do not have much time. i'm going ask my questions, i will ask the chairman that you respond in writing. if by somebody what time it is, they start describing the clock. i wonder why we can never get an answer on you on a comprehensive recovery plan. we have testimony and we hear their same old rehashing. we never had any real plan, comprehensive plan for recovery. number three, i wonder how much longer we're going have to wait for a plan. what information anyone could still be waiting on to come for

with the plan -- fourth with a plan. seriously -- the administration has serious credibility problems. the abrupt fade on taxes, not to take over personal property -- you know the stimulus has failed to do -- >> i do not agree with that. >> your words were that it would not exceed 8% employment and now it is 10% ample -- unemployment. there so many fair and legitimate questions that we can i get answered. when and fannie and freddie maze, conservatorship been? this is how we're going to go there. i don't think those questions are out of bounds at all. and number five, our creditors are worried about the failures of fannie and freddie, and of

course i think it has been as before -- how do we prevent too big to fail fannie and freddie going forward? these are questions congress passed to know. we cannot wait forever to find out. the board you do not have to wait forever. >> you do not have to wait forever. we are finding out today what you would like restructure the financial system. this is an enormously complicated question. we look forward to working with you to fix what a croaking in the system. >> what about the last year, what did they do? [unintelligible] >> if you worry that we have been idle, let me point out that we inherited the worst financial crisis in 75 years, since the great depression.

>> who inherited it? >> this administration and this congress did. >> this congress has been run by the same majority for three years. i am sick and tired of hearing that we inherited it. i am looking for some answers. >> we look for it to working with d on how to read formed the tse's -- working with you on how to reform it gse's. >> but no answers. >> we have laid out a detailed system of principles, what was broken and what caused this crisis, and that is a good foundation on which to build. if we do not agree on what was broken, we cannot begin the process. we're going to go through a process with this committee to consult with people in the private sector, and the academic, among republicans and democrats and figure out the best way forward. >> so you still do not have a

plan. >> congressman, again, and you're asking us to design in the midst of the worst financial crisis in a generation -- >> every business in this country is suffering right now and they are working on a plan for recovery and they are doing it in a crisis. >> and we have done extraordinary things and this economy is growing dim. when we came into office, when this congress came in, the economy was shrinking at a rate of 6% a year. today, because we actually acted as a country, the economy is now growing. things are dramatically better than when we took office 15 months ago because of the actions that we to. this house of representatives has passed the most sweeping set up financial regulations contemplate a new that -- since the great depression. we are on the birds and today we have a chance to begin a conversation about how to

reapportion the -- reform the gse's. we will take the best ideas on both sides and propose some and if the reforms. >> the gentleman from texas. >> thank you, mr. chairman. today we're talking about reforms and the house and financial markets which i think it's crucial and very important. my concern is that it has not been a full explanation on understanding how we got into the mess. so far what i hear is that we will deal with the problems with more technical solutions and more regulatory solutions rather than looking at the fundamental causes. to me the fundamental causes are well understood by the austrian free-market economists because they predicted early on is exactly what was going to

happen, and it did. and i put the blame on three things -- big sink interest rates too low for too long, and also the line of credit with the federal reserve, something that congress did, even though it was $2 billion, a created moral hazard because even greenspan admitted there was a $14 billion in direct subsidy to fannie mae and freddie mac, which also encouraged the distortion, and on the books, it was legal for the federal reserve to buy more -- mortgage debt. of course there note -- there were no restrictions because it was done in secret how much credit was created. because my concern and understanding of what was happening in july 2002, i was convinced that we were working on the financial bubble, and i introduced into days -- introduced legislation that would of remove the line of credit from the treasury as well

as prohibited the fed from buying mortgage debt, which most people would object to. this was an emergency! but that is what caused the moral hazard. and that was for the benefit of the selling debt overseas, encouraging foreigners to buy it, knowing the treasuries stand behind it and the federal reserve stands behind it. when i introduced that legislation back in 2002, by transferring their risk of widespread mortgage default, but government encouraged the risk of a painful crash and the housing market. the system could have staved off the risk by pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market. postponing the necessary but painful market corrections will only deepen the inevitable. that is not too much -- my

statement coming out with that of my own, but i endorsed free- market and austrian economics, and i do not see any understanding of that coming from our leadership in the congress or the treasury. i take it is so crucial that there is this understanding. so my question is -- are you familiar with the explanation of the austrian economist of the business cycle, how bubbles or form, and what we should do it? you shake your head yes. if you understand that, which part of it you not like and why don't we look more carefully at those economists? they were right 10 years ago, i believe they are right now -- why are they not consulted? >> congressman, i agree with much of what you have said. i think you're right to point out that a long period of low

interest rates put it -- played a major role in this financial crisis. you are also right that moral hazard played an important role. most dangerously and fannie and freddie. those institutions were allowed to grow to enormous size, take on enormous risk without capital to support those limits because of the expectation that government would come in and protect them. i completely agree with you. >> i wonder if i can get one answer. my bill -- would that be a proper thing to do now to make sure that line of credit and its inevitable purchase of this kind of debt from the fed, we should restrict that or remove it? would you agree with that? >> as i sat in my statement, when we think about what system should replace our current system, a critical part is to make sure you do not have institutions tied to shareholders taking advantage of a subsidy from the government

that leads to taxpayer exposure to these risks. a centerpiece of the reform will be dealing with the moral hazard in the current framework. >> doesn't the monetary system bring this in? but that is designed to be the lender of last resort. they are there to be there to pick up the pieces. >> you said it was different. because there was a credit line and expectation that the government would be there. >> the concerns were born out because that is what happened. the government picked up the pieces and now we are in a bigger mess. >> the gentleman from illinois. >> thank you, mr. chairman. mr. secretary, hank paulson, the

former treasury secretary, wrote in his book that in september 2008, the treasury issued -- on page 10 of your testimony, the purchase agreement. encouraging banks to purchase these. this was done at the same time to help satisfy the chinese government, which on billions of dollars of fannie and freddie bonds, which were paid off in their entirety. now we have these banks that were intentionally misled, potentially deceived to by

fannie and freddie preferred holdings, and then after the government said by these, the government just defaulted and stock all those banks. -- and stuck all those banks. big time. at the same time you're considering a capital program for small community banks. my question for you is, when i look at the objectives are reform -- of reform, and this is the guideline, i do not see anything in there that addresses whether or not these community banks should be treated the same as the chinese. that would be made whole when they were intentionally misled by the u.s. government to buy these bonds that turned out to be worthless. >> congressman, i cannot speak adequately to the judgment my predecessor made.

>> i understand. i am asking you if you have a solution for these banks that guy stuck? >> one of the most powerful things that we could do to get through the challenges ahead is to put in place at capital facility ability to come to the treasury and apply for capital for small business lending. i think that would make a big difference. >> but getting back to the preferred stock purchases, and getting back the money they paid in the first place and not worry about another exotic program from the federal government. >> i understand those concerns, but small banks across the country face a lot, -- challenges, not just those that hold fannie and freddie preferred stock. that is why small businesses are having a hard time getting credit. >> bat and the fact that the regulators have really -- matt and the fact that the regulators have relate tightened up, the regulator said that they have

not come up with the peace -- but they are making what credit is available even tighter. we have a situation where my question is, the treasury is part of a default program, are they willing to treat the community banks the same manner in which they treated the chinese in making sure that they were in indemnified on their bonds? >> i would be happy to spend time with you and look at this in more detail. .

>> i would have to think about that and get back to you. >> that is fair enough. thank you. the secretary has now excuse yead you. like to thank you i think we had a set of questions answered in a reasonable way, and we will now call the second panel.

aring will come to order as soon as i pour my water. even generals have to have water sometimes. we're here to consider the nomination of major general robert harding to be the

administrator the long awaited extremely long awaited desperately needed transportation security administrator tsa. first of what a welcome and congratulate mr. harding and also your wife who is with you. you do recognize your wife, right? [laughter] i would like to have her stand so we can -- tbb hutcheson and i can see her. that's right. that's good. committee practice. i want to congratulate you for your service to the nation. i said that to you. you've got an incredibly long record of service in the intelligence field and national security in general. we simply cannot ignore the fact that transportation administration has had no administrator, note leader of the team. all kind of things have happened. but for various reasons we just

have not having the leader of the team and i think we've got one now. the atom to christmas the attack and was treated the absolute need for tsa director. it's extraordinarily important post and it's you know, you preside over 500, 700 million passengers flying in this country and well over a billion in another five or six or seven years. our enemy as you know so well are persistent, dangerous, and we all know they planned new attacks, always planning new attacks. we need a highly qualified, strong administrator to lead in the workforce and protecting the country against future attacks. and i have no doubt that major general robert harding is ready and qualified to lead the agency

effectively. before retiring he served 33 years and developed extensive intelligence experience in the united states army material on that. during his time in the army major general harding served as the draft of operations at the defense intelligence agency that is just below the guide that drexel holding, director of operations, director of the agency. there's not much difference. the director for intelligence for the army u.s. southern command in several other important positions and with such a strong background in intelligence and security and such strong management and leadership experience i believe major general harding has the skills to make a positive and needed impact at the agency. i worry about that agency and morrell. i worry about equipment and a lot of things which we can talk about. mr. harding, the commerce committee is a significant role in homeland security oversight. we share that with another

committee. should you become firmly intend to work with you to make sure tsa succeeds. i'm particularly interested in having tea is a complete its ongoing cargo and surface transportation initiatives in approving the security of general aviation which is a subject that is rarely discussed but much in need of discussion and helping to develop and implement new technologies that will advance commercial aviation security. i also expect you to work with congress to make sure that tsa has the funds to secure the transportation system in other words we have oversight. we share oversight in the committee but we also are here to help you and we want you to have the budget you need and we are all aware of the president's constraints but we are also aware of our national needs. i said this before and i will sing it again this is one of the toughest positions in washington because the safety and security

of the system is the most solemn responsibility. and you have that so directly. the attempted christmas day attack made it absolutely clear that we continue to struggle to share intelligence effectively across agencies. it's quite remarkable if you do reading on you and your experiences and on the intelligence community which i know from service on the committee 9/11 got us a little bit of shared information but not much and it's not where it should be. the fbi is and where it should be and nobody is where they should be. so, secure good intelligence, protecting citizens but knowing what's going to happen before it happens is often the best way to protect them. if we are serious about addressing the gaps in both homeland security and intelligence community there is substantial work still to be done.

so, in closing to before we need effective leaders of the key agencies like tsa. we need somebody who can hit the ground running and provide clear direction. mr. harding, general harding, whatever you wish, a distinguished career in both government and private sector where he gained a strong management and leadership skills that the position demands made mechem a good fit for the mission. on that i am clear. as you know the nature of the job is that you listen to many complaints and get no praise. but together i believe we can work to make tsa successful. i look forward to your testimony major general harding and call now upon my distinguished colleague ranking members senator kay bailey hutchison. >> thank you, mr. chairman. i will not take long. i will say i think the service

to your country, 33 years is very impressive, and being a deputy chief of staff of the army director of operations for the defense intelligence agency are great qualifications for this job and i agree with the chairman and it's one of the toughest jobs in all of government because so many people depend on the safety of our air travelling system as well as surface traveling system and i think the chairman mentioned, but i am in complete agreement that we have i think put so much emphasis on aviation safety as we should that perhaps we haven't looked enough that surface transportation safety for the buses and trains, and i think that's something that you are going to have to take under your purview. one of the issues that i want to make sure we are also addressing

is federal law as you know does prohibit screeners in the tsa from striking. however, there are efforts ongoing for collective bargaining by the tsa screeners and previous tsa batvinis traders -- administrators said they would be concerned about collective bargaining of allowing the flexibility that you need to be able to deploy forces to a certain area of an airport or to a certain airport to change the working hours at a crisis or an emergency is not hand. so i hope that you will also be looking at the flexibility of the work force and the need for that flexibility as one of your priorities. so, with that i would like to go

on to questions if the chairman is ready because i have a hearing at 10:00 that i also am the ranking member the issue of collective bargaining for screeners, how would you handle that in your capacity as the leader of this agency? >> senator hutchison, thanks for asking the question. i'm familiar with the issue. since being asked to consider the position, have studied it. i recognize that all parties agree on the same thing, senator, that you just indicated. on the need for flexibility and agility, all parties agree for the administrator to have the ability to move screeners on a moment's notice in a response or prior to a terrorist incident. everyone seems to agree that we need the strength and security.

if confirmed, i would love to have the opportunity to broaden the experience that i've already had in looking into this by talking to a very broad cross section of the transportation security officers, of other members of t.s.a. as well as the members in d.h.s. and as i've learned for 33 years in the military and especially in my last few years as a flag officer, provide the best advice i can to the decision maker, in this case sister, secretary and i think the secretary and i in riving at a decision will be very concerned about the implementation of such a change if it was to be accepted. ry about the implementation of such change if it was to be accepted.

again, we both agree, senator, but we would never bargain away security but we probably also both agree that we really need to do an in-depth review before i inform the secretary of my recommendation. >> well, i'd understand your inability to make a clear answer but i'm going to be very interested in following this, because i just think that there are some jobs that are not nine to five, and when people apply for them they should know it's not mine to five and security and law enforcement, military as well are those kinds of jobs, and so i hope that you will be very forthcoming on this because it will be of great concern to

many of us. speaking of that, i also want to ask the question that i asked of every one of our nominees who is going to be in a position to run an agency or have a major commission appointment, and that is we rely on an open dialogue with people who we confirm as part of our oversight responsibility, and i want to ask you if all members of committees and staff can count on the cooperative relationship with your agency and with you as we go forward. >> senator, you can count on that. >> thank you. let me ask you one other question and that is on your -- your previous company that you found and have since sold,

harding security associates. i think that some of our staff have talked to you about what your plans are for recusal of yourself, from contracts that might be coming up just within a few months of your confirmation i think maybe july of this year, your recusal previous commitment would run out. how do you intend to handle contract that might come up in key areas of the transportation security agency with your former clients from your private sector position following the retirement? >> senator, i would recuse myself as you indicated. four things come to mind. one, i worked for quite a few weeks with the office of government ethics.

i decided in working with the office of the government ethics to draw a line and go out and about what blood normally be expected of the nominee. so i met the hurdle of the normal expectation which is the ethics pledge as well as i am sorry the ethics regulation as well as president obama's pledge and that would mean it would recuse myself from any dealings with my former company which i walked away from and have no connection with. i would in addition recuse myself in this very bright line and up and above what is normally expected in a regulation and the pledge i would recuse myself from dealing with any companies that actually worked with my company and that would be according to the office of government recommendation for a year from the sale of the company.

>> all right. i may want to pursue that further when i look at what some of the relationships are with former clients, but i need to get a clear list, so could buy submit a question to you in writing or leader? >> of some of the senator. we have all of that listed and i would be glad to provide that to you. >> okay. last question then, and i appreciate the chairman's indulgence is on surface transportation. 60% of the president's budget request for 2011 is aviation security. 2% is for surface transportation security, yet we have seen in other places severe attacks and trains as well as buses and other types of public

transportation service transportation. what would be your commitment in looking at what can be done in the surface transportation areas to increase the priorities? >> that is a very important question. and i think the answer is informed by intelligence, and as we've discussed intelligence is the common denominator across all modes of transportation. we have actually seen as you indicated where a threat if they could not attack by air would look for other modes of transportation. i would welcome the opportunity if confirmed to work with stakeholders in of looking at a systematic way of applying threat and risk management and risk mitigation across all modes of transportation. i recognize that would be my responsibility if confirmed. all i applaud the fact tsa has already recognized the

intermodal nature of the transportation system that work to safeguard allows examples like the viper teams, the visible intermodal protection and reaction teams that you see providing visible examples of how the injury agencies come together in things like other than aviation. i think initiatives like that are very important both because of the visibility as well as they are inherent bringing together of the injured agencies and i would like if confirmed to continue that process and finally, combining as a threat that we would work with the dhs on, the intelligence and analysis, karen why have the fortune of working with for 15 years, we would apply both the

resources and budget appropriately across all love the tsa based on what we see as a threat. specs before mr. sherman very much. >> thank you, senator hutchison. it's interesting the way we react in america. we react to events. we don't see them coming as well as we should. and you sort of intersect both responsibility but also the intelligence aspect working out to find where things may be coming from and when you look back after the eshoo bomber -- shoe bomber we started taking our shoes off and that was fine. loafers onshore wind up in the stock market. and then after the 2006

commercial departing from london, all of a sudden we were down to 3 ounces and anything over 3 ounces what is not acceptable, and that sort of sums up in my thinking the question that perplexes me. you have a limited amount of money that's going to remain so. on the other hand, i really do believe in intelligence. i really do believe putting it bluntly that leon panetta has made one heck of a difference in what is going on in afghanistan and parts of pakistan. he does that through intelligence. he does that through other methods. but that's proactive.

that's looking before something happens, taking care of a problem before something happens. so, help me understand in your mind the difference between getting the passenger getting on the airplane and putting the person down, putting them through screenings, wide body imaging when that comes as opposed or not as opposed to put in conjunction with spending money and time on the intelligence that leads you to warnings. now that's a very hard question because there are so many people and so many places. but you come from that background. i believe in what i say but i'm not sure what the proper balance

is. maybe you could give me your views. >> mr. chairman, a very good point what were describing is the difference between 100% risk avoidance and risk management which also describing is the chances that we are willing to take in a very measured way using intelligence applied to risk management. tsa i noticed is going in that direction there for the product list referred to changed over time. i think if confirmed things like the product list need to continue to evolve. but more importantly, to your point, intelligence, the choice between pure risk avoidance in this nation and being informed by intelligence i would choose to be informed by intelligence. i would choose to make decisions based on the intelligence that we gather. i would choose to be proactive member of the intelligence community working with my

colleague at the department of homeland security, karen lakner on the intelligence analysis piece. i would choose to use that intelligence effectively, again, has sent senator hutchinson pointed out, in applying resources across the entire transportation system. and i would use intelligence and a way that would allow our stakeholders and more important the american public to understand what we are doing, why we are doing it, to the extent possible i would share intelligence with a stakeholders that include the association's even industry we would look to to help us on the technological side, to help us not just meet the threat but to stay ahead of the threat. we have to be proactive. this committee especially recognize these the evolving nature of the threat. what we have to do is stay ahead of the threat and the bottom line, mr. chairman, is i think

through the use of intelligence, correct application of intelligence, being a productive member in the intelligence community, using that to inform stakeholders and of why resources is what will help us move forward both technologically and keeping up and head of the threat and moving away from things that appear to be more security theater than actual security. >> i think i got that. i'm not totally sure that i did. can you give me an example of where, and then this will be my last question and we will go on to others, where intelligence has been helpful. have you perhaps heard about with respect to potentially dangerous passengers? >> in the run-up to these

hearings i've had briefings. but i can't go into detail here but i have had briefings where the intelligence that tsa is using@@@@@ @ @ @ @ @ @ @ @ @ @ ) >> ok. i thank you. senator lemieux? >> thank you, mr. chairman. chairman hardy, thanks for putting yourself up for public service. after 33 years in the military and serving as a general and being in the charge of the defense intelligence agency i think you have the experience for this job. i'm glad that the president has pushed forward someone who has this intelligence focus. yaounde i spoke about this when we met previous to today's hearing. in your testimony, you would

speak of, although you would be a consumer of intelligence, that you will work closely with your partners in the intelligence community to improve the kinds of information needed and you talked about working with miss wagner here a moment ago. one thing the american people expect is someone who is going to have a position like yours is meeting on a regular basis with the other folks fighting this war on terror. you're meeting with the director of national intelligence or the secretary of defense or their surrogate and i hope that you will push for that type of collaborative working relationship because i think, you having that information is essential to doing the job that you need to do to protect the american people. echnology.

we send everyone through basically the same security whether they are a 4-year-old, 85-year-old or a 20-year-old male from a foreign country, and i want you to sp you will about the idea of using behavioral screening, about new technologies that are available looking at models for example was used in israel where they've been tremendously successful in stopping terrorists on the plains, a country that is even more targeted and we are and how we can use technology with intelligence to put together something like a threat index that would allow those for example you are of no threat, you should be a zero on the threat index, but there are others that should be checked more closely. how can we differentiate the way that we treat people through the process so that we could

expedite those people who are not of a threat but to pay close attention to those who might be? >> very good question, senator. the transportation security administration has started the process of fleering security. part of the layers of security speak to your point on behavior detection so that tsa has deployed be your detection officers and airports. i think the number is up close to around 2,000. you compare that to your example on israel and even though there is a difference in scale, some of the things we see from our is really partners and friends is the use of engagement. we've just started to do that in the tsa. it's not at the same level being done in israel but it started with a one week course program

for the tso to engage. it's followed by supervisors taking another week and those kind of engagements. i agree with you that we should move even closer to an israeli model where there is more engagement with passengers. i think that increases the layers and pushes the players out. i think that is a very important aspect of providing security is engaging the public. the last point is one of the things i was informed of this in the israeli model is training, more training and drills, and if confirmed, i would look forward to working with my 48,000 trademark -- at tso and that their training goes further than where we are presently and move

toward the model of training and trilling, and i feel he would see a change very fast. is to make a final question that is appropriate to anyone from a governmental agency and that is the idea of using performance metrics and other tools not unlike the military uses to ensure you are getting the most out of the dollar's the american taxpayer is funding in your agency. we don't see very good job in government making sure we are doing things efficiently and effectively, and it's not a sexy topic for folks who run agencies to drill down and find out whether or not the resources are being used in the best possible way but i would ask you and hope to get your commitment this morning that upon your confirmation when you take up your post that you will use performance evaluations and metrics and do everything you can not only as an agency head but a manager to make sure the

american taxpayer is getting its money's worth. >> you have my commitment, senator. >> thank you. >> let me just say before i call on senator warner that we have an awkward situation this morning in that we are having the signing of the health bill at the white house and we have to leave at 10:15 from this room, senator warner and i. so what you will be doing -- amy klobuchar tiemann and left but she had to go but she had a series of questions that she is going to send you and i think what we are going to be giving -- i'm going to be doing that on the air cargo screening, general aviation and other things simply because this is a rather large occasion that people have been working for for a long time. but any chance, please understand that we are not giving you short shrift.

>> i totally understand mr. chairman. >> senator warner. >> thank you, mr. chairman. general harding, maybe it is a good idea that we are leaving for the hearing in the same group. i will be brief recognizing time constraints, let me first of all ago with my colleagues have said and it's good to see you again and i think the president has chosen well someone with your unique background and qualifications and i think that you'll be a great tsa administrator and i look forward to working with you. i want to also add a kind of dido agreement with my colleague, senator lemieux, as a former business got a i'm focused on biometrics and so want to reinforce what my colleague had said and i also will be looking for those kind of metrics performance metrics and milestones within the tsa. i want to very quickly raised

two questions that are perhaps a little bit parochial in nature but i think they actually have applications beyond the specific circumstances of each of the issues i'm going to raise. first is a circumstance and i think this happened beyond just at an airport beyond just the airport i'm going to raise where tsa made commitments that have not come through the circumstance and case in point i'm going to raise is the richmond airport. the richmond airport back in 2004 was doing a significant upgrade its facilities. it was tsa asked to the inline explosive detection systems richmond said they would go ahead and start down this path. tsa committed to work with richmond airport. tsa said, i don't even have all the data here coming into thousand five well we don't have the money right now, but you guys keep on going and we will be there for you. richmond airport proceeded to go

ahead and put in this state of the art detection system at tsa request. the finished the system in 2007. $3.6 million additional still no payment. and in terms of via i think it's bad business, if it is also bad faith and an example of not the kind of a collaborative effort to want to have with your local airport authorities. so i raise this with you. as of your predecessors. i would really love to hear an explanation of how not only the specific circumstance of richmond will be dealt with but my understanding there are other airports around the country have made investments in current technology at the request of tsa but have not been reimbursed for that. are you familiar with this circumstance in richmond with the other airports? >> senator, i'm familiar with the circumstance of richmond and other airports and i agree with

the sentiment and have confirmed you have my commitment i will work in to that. >> is that confirmation in richmond at even getting paid? >> senator, you have my confirmation that i promised to look into it. to be very candid with you when i first discussed this with members of tsa i asked to have it broken out much like you from a business point of view, very understanding how the commitments it made by the government and what i wanted to do is ask all of those kind of commitments whether the airports believe they were made or not if they have something in writing, let me look at those and the broad range of them and then lets just do what's right. i promise even before your question to look at that, senator, and if confirmed i promise you also get back to you. >> thank you. i haven't seen or heard anything from richmond that there was any lack of or miss understanding -- i think i've got the documentation, i will forward it

to you if it will be helpful. there didn't seem to be any doubt at least anybody on the richmond side that there was any ambiguity about the tsa asking for this current technology to be implemented and number two that tsa would be responsible for the reimbursement. thank you for that. ..

my priority, the workforce, well led, well motivated. the workforce is very important to me and that will go to the issue of morale. i can tell you that comparisons that have been made of the transportation security officers of 48,000 or so, so larger organizations that have been around for a long time compared to t.s.a. which has been around for nine years, i find interesting, i find informative. there are things i think we need to do in t.s.a. because it is so young and large and across 150 airports that are a little different than what we see in other agencies. if confirmed, morale is a very high priority of mine. >> thank you, general harding and thank you, mr. chairman. >> thank you, senator warner, very much.

the senator wants to ask a question. over a period of years, i've been very frustrated by the special treatment of general aviation. they don't carry their weight financially in paying for the air traffic control system. i'm talking about the one that we have, which isn't any good, but the one we want, which will be very, very good. , would you put it as a top priority to consider developing a national strategy for how gaa functions in an

appropriate or proportionate way within our national air traffic situation? >> mr. chairman if confirmed, i totally agree with you, it would be to look at general aviation not just at the threat that from the point of view as a stakeholder, and as an industry that is just as concerned with security as the rest of us are. i would make that a very high priority to bring them into the fold, and to make them part of how we view tsa views the total transportation network. >> i think that they are kind of the weak link in fact in the situation that you face because there is no-- you you go out to dulles and you just walk onto a charter airplane or whatever. you are not checked.

your baggage is not checked. it could be anybody. it is quite remarkable. it is true all over the country as far as i no, and i think that not just in the funding, the financing of the system but also just it's very dangerous. and a lot of people use it. so you'll take a look at it? >> mr. chairman, i promise. not only working with the stake holders in general aviation but working with your committee also. i think it is very important. you and i discussed my experience and your experience using general aviation. i think we agree that general aviation needs to be as informed of a threat and prepared for it as the rest of the transportation modes that we're responsible for and it is something that i would make a very high priority and look into, senator. >> and you understand their frame of mind is very different. i mean they don't consider themselves really a part of it

because they are privately owned. they pick their own routes, do their own thing but they use the air traffic control system just the same as anybody else. i'm not talking about crop dusters or -- i'm talking about you know, small jets on up. king air's. i am talking about the small jets on up. and, i have tried to address that in several ways and it is just amazing what few phonecalls will do from some of these people that own those jets, show shutting down action in congress and it is not good. so i just put that before you and now i call upon my esteemed colleague, senator klobuchar who was going to share this. this. >> thank you very much senator rockefeller. i am catching my breath. i literally ran here general harding. thank you very much and it was

good meeting with you in my office the other day and i want to tango charlie rockefeller for holding this hearing on this important nomination. the position of tsa administration, administrator as we know is one of the most important positions in the administration. that was made very clear to us on christmas day and as you know that involved involve the northwest airlines flight which northwest originally based in minnesota and now delta, so we really care a lot about this issue. i first wanted to ask you about your background in intelligence and how you feel your military in private-sector background are going to help to inform you to work to protect america's transportation security? >> in three areas senator. my 33 years in the military and rising to the rank of major-general has helped helped me understand management practices and principles that senator warner just implicated as far as morale and workforce

and i think that is very important. my years in the intelligence community and most of my 33 years in the army i spent within the intelligence community were also important to tsa in being able to inform tsa across the board on this thread, the threat to aviation, the threat to all modes of transportation and i think the associations that i've had in the intelligence community to include my professional association with karen wagner who is the head of intelligence for dhs as well as throughout the intelligence community is very important and i think would help tsa. finally i think my experience in the industry, where i learned that attention to both the client as well as being a very attentive to the backroom is very important, and i think all

three, my experience in the army with management and leadership to experience in the intelligence community which i think would inform tsa, to my experience as a small-business owner and creating 400 jobs is very important in some skills that i would like to bring to the job if confirmed. >> thank you. one of the things that i know secretary napolitano has been working on this but actually working with some of the private sector and with the airline dummies policies especially overseas is very important because as you know, as we transition and our security and the watch list and how things are handled differently, we still have the issue and a lot of the airports around the country it is the airlines that are on the frontline in terms of sort of having the responsibility for these lists. could you comment about how you see that relationship? >> i see that relationship evolving senator. the watch list itself in the process as you know is

undergoing a review of being led by john brennan at the president's direction. i am very familiar with how the screening database informs both are selected with the no-fly list in how we are moving into secure flight. if confirmed, i would like to sit with the participants and the presidents review, look at some of the preliminary findings and hopefully be a stakeholder in the results. and participate in how we shape a watch list system that is understandable, transparent at least to the extent it can be to the intelligence community and most importantly as effective as we can make it. >> very good. now i would like to hear your thoughts on the full-body scanners. i think i explained to you in my office, i am someone with a hip replacement that gets patted down each time and this is kind of appealing to me that i won't have to have this happen in front of my constituents every single time i go through the

line but obviously the real reason to do it is not for the convenience of travelers but for safety. is still uncertainty of someone about this new technology, but also there is great potential with it. so could you talk about your views about these full-body scanners and how you think they should be rolled out? >> you hit the nail on the head. it is the best technology we have right now. i did get a chance to visit the entire process at reagan airport about a week ago. i think one of my major concerns was from the privacy point of view. i entered a booth at reagan airport that is separated from where the machine was. the machine is one of those millimeterwave type genes. as i entered the booth, my phone , my iphone was taken away from me. i tested that to see whether or not somebody was conscious enough to say this is something you can't bring into the booth

and as they entered the booth i got a chance to talk to the tso who was sitting there with a screen. and i asked exactly what he was doing and apparently a woman was entering the millimeterwave machine. she had an object on her left leg, middle. the tso hit his whisper device that communicated to the tso on site and pointed out that location. the woman then went back through and it was something in her pocket that subsequently was removed. i then looked at the computer back in the booth and asked the screener how can he save that image which he could not do. i am not a cyberexpert but i could tell the way the computer was figured that it had no storage. i then tried to exit the room before the woman had left her second screening and i couldn't. i wasn't allowed to. therefore when she was clear i was able to leave the room after seeing that image.

i was convinced that day that privacy became, was very important as these whole body imaging machines were put into airports. i am still working to come to grips with this but rent in every airport with the implementation of cross all 450 airports and other things attendant to the technology improvement of those machines. i think in the future you will see those machines improved, but i also believe that somehow, and there is a lifecycle of about eight years i think on those machines, so sometime, i would believe in the next two or three years as a next-generation type of technology that we need to be looking at, that can get it better and more capable the use of the threat. >> because i think we saw like with those puff portals, now there are 22 operating and those didn't exactly work the way people thought they would so i would imagine that there would

he advances in technology as we go forward. the second thing which we touched on was just the secure flight program and the changeover to that with the watch list. and, in light of christmas bombing attempt, and other issues that have come out about the watch list, kind of the counter is that you have people on this list that shouldn't be on this list and i think i mentioned to you the baby going to disneyland from minnesota who have a common last name, and the family weren't able to board the nate-- the plane because his name was on a watch list years ago. i think it may have been fixed in the last few years that he encountered problems in the years afterward. at the same time you have people like the christmas day bomber whose name didn't appear on the list, so what do you think needs to be done to fix it? >> i think we need to continue moving in the direction of secure flight.

i think moving the threat thread list into the handset tsa to do the screening is very important. i think the redress program is something that the american traveling public has been asking for for a long time and from the briefings i have received senator that seems to be proceeding at pace but the final line is i think we need to continue to move in that direction if confirmed. i think it would accelerate the process especially of secure flight and i would love to be more informed and ask questions about the effectiveness of the redress program. >> do you believe the tsa is going to be able to meet the current goal of having secure flight fully implemented are all domestic flights by this time or early 2010 and for all international flights by the end of this year? >> i would like to get back to you on all of the international flights. senator i believe tsa will meet the domestic goal, but i would like to take for the record and get back to you on the

international. >> i also know secretary napolitano has said she has been meeting with other partners internationally about their security and how we can work together on this. will you be involved in and in that as head of tsa, and if confirmed in terms of trying to reach out to the other airports in other countries? >> very good question senator and i expect to be fully participating member of the secretary's team, and pretty sure the international carriers would meet in canada i believe in september and if confirmed i'm pretty sure the secretary would send me to that. >> okay. in the president's budget, he actually upped the number of federal air marshal service personnel and i think what and 85 million for that and has also requested 71 million to fund an additional 275 proprietary

explosive detection canine teams can you elaborate on that plan to use these additional personnel and canine teams to the utmost capacity and how do you think that will work? >> only to the extent that they are part of the layering system that i described earlier. the canine teams are very important to the layers of security that we provide around the airports. as are the air marshals and i applaud the increase in support and resources for the air marshals and the canines. >> in his speech on january 7 the president explained that rather than a failure to collect our share of intelligence, the failure on christmas day was a failure to connect and understand the intelligence that we already had. what steps are you going to take to make this a priority at tsa to better coordinate and streamline data gathering and

watch lists and things like we have already talked about? >> working cooperatively senator with the intelligence office within dhs as well as the intelligence community writ large, being a proactive member of the intelligence community do the department of homeland security's-- will help tsa received more impossibly better actual intelligence. the last point there, as you know senator tsa just recently cleared about gore is moving in the direction of clearing about 10,000 individuals in tsa to receive this intelligence. just getting in to it and holding onto it at the headquarters so i think that is part of that process. >> something else that we talked about. in particular tsa policy that impacts my state. my state i have i consider one of the best airports in the country and it is a hub and a

very active airport, and there's this group are harman to check luggage at appropriately cleared appropriate have to be rescreened before the transfer to a u.s. base connecting flight. this causes delayed connections for passengers arriving from canada since their baggage must be physically transported from the arrival aircraft to a baggage screening facility. rescreened by tsa in retransported to the connecting flight in the know this has all been done for good reasons and obviously it is a balance with security. but it is my understanding that tsa has been working with canadian authorities for well over a year to reach an agreement that would put in place new technologies and processes for canadian baggage screening that will meet u.s. security standards. you have given me our commitment that you will work with me to resolve this issue. do you have any other comments about that? >> i reaffirm my commitment senator. >> that is a very nice short

answer, very smart. i just want to thank you or your work. you have a big job in front of you. i view this as a most important obviously to our security but i also think there there are thino do where we can actually >> i do. >> ok. thank you. i know that there will be questions that will be allowed for the record in this hearing. some of our colleagues couldn't be here today and want to submit questions and questions for the record are due at 5:00 p.m. tomorrow. with that, thank you very much, general harding and the hearing is adjourned. >> thank you. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute]

>> in a few moments, president obama signs the health care bill and he talks about the health care issue at an event at the interior department and "washington journal" is live at 7:00 eastern. we'll take your calls and questions on the government's role in housing, border issues between the u.s. and mexico and the declining prison population. google closed its search engine in china this week because of concerns over government

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also passed by the house. after the signing, the president and vice president biden spoke with the interior department. together, both of the events are more than an hour. >> the president of the united states and vice president of the united states. [applause] >> thank you all. [applause]

>> thank you all. [applause] >> mr. president, i think we've got a happy room here. it seems ridiculous to say thank you all for being here. [laughter] ladies and gentlemen, to state the obvious, this is a historic day. [applause]

in our business, we use that phrase a lot but i can't think of a day in the 37 years i've been a united states senator and the short time i've been vice president that it is more appropriately stated this is a historic day and history, history is not merely what is printed in textbooks. it doesn't begin or end with the stroke of a pen. history is made. history is made when men and women decide that there is a greater risk in accepting the situation that we cannot bear than in sealing the our spine and embracing the promise to change. that's when history is made. [applause] history, history is made when you all assembled here today, members of congress, take charge to change the lives of tens of

millions of americans through the efforts of those of us lucky enough to soy here in this town, that's exactly what you have done. you have made history. history is made when a leader steps up, stays true to his values and charts a fundamentally different course for the country. history is made when the leader's passion, passion is matched with principle to set a new course. well, ladies and gentlemen, mr. president, you are that leader. you have -- [applause] you deserve it. you deserve it.

mr. president, your fierce advocacy, the clarity of purpose that you showed, your perseverance, these are in fact, these are the reasons why we're asemabled in this room togethered to. doctor today. many men and women are going to feel the pride that i feel in watching you shortly, watching you sign this bill knowing that their work, their work has helped make this day possible. but mr. president, you're the guy that made it happen. [applause] and so mr. president, all of us, press and elected officials assembled in this town over the years, we've seen some incredible things happen. but you know, mr. president, you

have done what generations, of not just ordinary but great many and women have attempted to do. republicans as well as democrats. they have tried before. everybody knows the story. starting with teddy roosevelt. they tried. they were real, bold leaders, but mr. president, they fell short. you have turned, mr. president, the right of every american to have decent health care as a right for every american in history. [applause] mr. president, i have gotten to

know you well enough, you want me to stop because i'm embarrassing you but i'm not going to stop for another minute, mr. president, because you delivered on a promise, a promise you made to all americans when we moved into this building. mr. president, you are to repeat myself, literally about to make history. our children and our grandchildren, they are going to grow up knowing that a man named barack obama put the final gerter in the framework for the social network of this country to provide the single most important element for what people need and that is access to good health. [applause] and that every american from this day forward will be treated with simple fairness and basic justice. look, the classic poet virgil

once said that the greatest wealth is health. the greatest wealth is health. well, today, america becomes a whole lot wealthier because tens of millions of americans will be a whole lot healthier from this moment on. ladies and gentlemen, the president of the united states of america, barack obama! [applause] >> thank you, everybody. thank you. thank you. thank you. thank you. thank you, everybody. thank you. thank you so much. thank you. thank you. thank you. thank you. [applause]

thank you. thank you, everybody. thank you. thank you, everybody. please. have a seat. thank you, joe. [laughter] >> good to be with you, mr. president. >> today, after almost a century of trying, today, after other a year of debate. today, after all the votes have been tallied, health insurance reform becomes law in the united states of america. [applause] today.

it is fitting that congress passed this historic legislation this week, for as we mark the turning of spring, we also mark a new season in america. in a few moments, when i sign this bill, all of the overheated rhetoric over reform will finally confront the reality of reform. [applause] and while the senate still has the last round of improvements to make on this historic legislation and these are improvements, i am confident they will make swiftly, the bill -- [applause]

[laughter] the bill -- the bill i'm signing will set in motion reforms that generations of americans have fought more and marched for and hungered to see. it will take four years to implement fully many of these reforms because we need to implement them responsibly. we need to get this right. but a host of desperately needed reforms will take effect right away. this year. [applause] this year we'll start offering tax credits to about four million small business men and women to help them cover the cost of insurance for their

employees. that happens this year. [applause] this year, tens of thousands of uninsured americans with pre-existing conditions, parents of children who have a pre-existing condition, will finally be able to purchase the coverage they need. that happens this year. [applause] this year, this year insurance companies will no longer be able to drop people's coverage when they get sick. [applause] they won't be able to place they won't be able to place lifetime limits or restrictive